CFP Ethics Practice Test

In determining whether a financial planning engagement exists, which factor is NOT considered?

The client's understanding and intent in engaging the CFP professional The compensation model agreed upon, fee only vs commission or salary-based The degree to which multiple financial planning subject areas are involved The comprehensiveness of data gathering

Correct Answer:

The compensation model agreed upon, fee only vs commission or salary-based

Explanation:

The key idea is that an engagement exists when there is a reasonable client expectation of receiving financial planning services, demonstrated by the client’s understanding and intent, the scope of services being discussed, and the data gathering the planner undertakes to develop a plan. The compensation model doesn’t determine whether that engagement exists; it relates to how the services are paid for and potential conflicts, not to the establishment of the client-planner relationship. So the compensation approach is not a factor in deciding if an engagement exists.

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