Tomas, a CFP professional, has agreed to provide Financial Planning to a new client aged sixty-one who supports a disabled adult daughter. At the second meeting the client announces that he wants to buy a joint life annuity with most of his rollover balance. Tomas prepares a written recommendation for that annuity the same week, before he has collected the client's debts, employer benefits, health status, risk tolerance or objectives for his daughter's long-term support. Which statement best describes the defect in how Tomas has proceeded?
- AHe has recommended a product before obtaining the client's qualitative and quantitative information and analysing the client's current course of action, so the recommendation rests on an incomplete picture of the client's situation. Correct
- BHe has failed to present his recommendation orally as well as in writing, which the Practice Standards require whenever a product is recommended during a Financial Planning engagement.
- CHe has simply followed the client's instruction, which the duty to follow client instructions requires of him, so no Practice Standard has been breached at this stage of the engagement.
- DHe has breached the duty of confidentiality by taking into account benefits payable to the client's disabled adult daughter without first obtaining her own separate written consent to the planning work.
Why A is correct: Correct. The Practice Standards require the planner to understand the client's personal and financial circumstances and to analyse the current course of action before developing and presenting any recommendation.
Why B is wrong: Tempting because Financial Planning does carry documentation obligations, but there is no rule that a recommendation must be delivered in both forms. The defect here is sequencing, not the medium of delivery.
Why C is wrong: Tempting because following reasonable client directions is genuinely one of the fiduciary duties, but that duty covers lawful directions about the client's affairs. It does not authorise skipping the analytical steps the Practice Standards require.
Why D is wrong: Tempting because a third party is affected by the plan, but the daughter is not the client and no confidential information of hers has been disclosed. Considering a dependant's needs is part of understanding the client's circumstances.