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Rule 8 - A CFP must disclose potential conflicts of interest.

Posted by David Gobeil on

When the December 2017 CFP examination was scored, several ethical issues were flagged in certain candidate responses.

Rule 8 – When working with related clients Rule 8 of the FPSC Rules of Conduct contained in the Standards of Professional Responsibility specifies that a CFP professional must disclose potential conflicts of interest between the CFP professional and the client, and between clients in a joint engagement. Such disclosure must be made in writing to the client(s).

Rule 8.1 prohibits a CFP professional from providing services to a client where there is an existing conflict of interest, absent specific written consent by the client to proceed with the engagement.

The Guidance to Rule 8 and 8.1 highlights the potential conflicts that can arise in a joint engagement, or in separate engagements for parties who have a relationship. The potential for conflict rises significantly in blended family situations.

A CFP professional should exercise caution if choosing to work with related parties, including clients who are ex-spouses. In fact, where a conflict of interest arises during an ongoing engagement, Rule 8.1 says that a CFP professional shall immediately stop providing services and shall not resume providing services to both parties unless and until they each make the informed decision to continue with the engagement and provide written consent to continue. Such written consent must include a description of the potential conflict of interest and confirmation of the client's decision to proceed.

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