Monitoring and Updating Progress

CFP Board’s new Code of Ethics and Standards of Conduct (“Code and Standards”), effective October 1, 2019, introduces a new 7-step financial planning process that concludes with an almost entirely new section outlining a CFP^® professional’s responsibilities with regard to monitoring the Client’s progress and updating goals, recommendations, or implementation decisions.

Establishing Monitoring and Updating Responsibilities

A CFP^® professional must establish with the Client whether the CFP^® professional has monitoring and updating responsibilities. Code and Standards Section A.10.b.ii states that a CFP^® professional is responsible for monitoring and updating the Client’s Financial Planning recommendation(s) unless specifically excluded from the Scope of Engagement. CFP Board’s new Roadmap to the Code and Standards provides these tips for addressing monitoring expectations in a Client Engagement:

• Be realistic and clear in setting monitoring expectations.
• Monitoring is an ongoing obligation unless the Engagement is terminated.
• Document when the Engagement is not ongoing.

Communicating Monitoring and Updating Responsibilities

When the CFP^® professional has responsibilities for monitoring and updating, Code and Standards Section C.7.a outlines what the CFP^® professional must communicate to the Client:

• Which actions, products, and services are and are not subject to the CFP^® professional’s monitoring responsibility;
• How and when the CFP^® professional will monitor the actions, products, and services;
• The Client’s responsibility to inform the CFP^® professional of any Material changes to the Client’s qualitative and quantitative information;
• The CFP^® professional’s responsibility to update the Financial Planning recommendations; and
• How and when the CFP^® professional will update the Financial Planning recommendations.

Monitoring and Updating Responsibilities

A CFP^® professional who has monitoring responsibilities must analyze, at appropriate intervals, the progress toward achieving the Client’s goals. The CFP^® professional must review with the Client the results of the CFP^® professional’s analysis.

The CFP^® professional with monitoring responsibility must also collaborate with the Client in an attempt to obtain current qualitative and quantitative information concerning the Client’s personal and financial circumstances. It is important that the CFP^® professional ensure appropriate access to or authority to communicate with third-parties to gather information to fulfill your monitoring responsibilities.

Where a CFP^® professional has updating responsibility, and circumstances warrant changes to the Client’s goals, recommendations, or selections of actions, products or services, the CFP^® professional must update as appropriate in accordance with the Practice Standards.

Documenting Monitoring and Updating Activities

The new Code and Standards sets forth, in Standard C, a principles-based documentation requirement that applies when a CFP^® professional provides or is required to provide Financial Advice in accordance with the Practice Standards. A CFP^® professional must act prudently in documenting and retaining information, as the facts and circumstances require, taking into the account the significance of the information, the need to preserve the information in writing, the obligation to act in the Client’s best interests, and the CFP^® Professional’s Firm’s policies and procedures.

In addition to information to be documented regarding qualitative and quantitative information the CFP^® professional obtains from the Client, analysis of the Client’s current and potential courses of action, and details about any recommendations, Standard C outlines several types of information specific to Step 7 of the Financial Planning process that a CFP^® professional may consider documenting in writing, where relevant:

1. The CFP^® professional’s analysis of the Client’s progress towards achieving goals;
2. Which actions, products, and services are and are not subject to the CFP^® professional’s monitoring responsibility;
3. How and when the CFP^® professional will monitor the actions, products, and services;
4. How the CFP^® professional will be informed of any materials changes in the Client’s qualitative and quantitative information; and
5. How and when a CFP^® professional who is responsible for updating the Financial Planning recommendations will do so.

The principles-based documentation requirement in the Code and Standards does not require the CFP^® professional to provide the information to the Client. A CFP^® professional may memorialize information in a method of the CFP^® professional’s choosing, and retain the information in, among other places, a client file, a Contact Management System file, a paper file, or a digital vault.