CFP Course Notes #2: Common Examples of Negligence by Financial Advisors

In keeping with my goal of finishing one course per month from the University of Georgia Self-Paced CFP education program, I wrapped up the first course “Fundamentals of Financial Planning” in February (barely). Here were the topics covered (source):

The Personal Financial Planning Process
Economic Concepts and Consumer Protection Laws
Personal Financial Statements
Managing Cash Flow and Debt
Using the HP-12C Calculator
Using the HP-10bII Calculator
Educational Savings Techniques
Educational Aid and Funding Calculation
Regulation of Financial Planners
CFP Board Regulatory Requirements

I previously covered the official 7-Step Financial Planning Process in Notes #1, which was enlightening. I ended up spending the most time overall on the HP-12C calculator section, as it took several reps to learn and memorize how to use all of the specialized buttons for the financial calculator.

I personally didn’t learn much new in the Educational Savings and Aid sections, given my previous research as a parent and owner of multiple 529 plans. It did provide a good generic overview for those that haven’t gone down that rabbit hole.

In terms of new practical information, I again found it helpful when they showed me the perspective of practicing advisors. The course wisely warns potential CFPs of the most common mistakes that have resulted in negligence lawsuits…

Failure to address risk of disability.
Failure to address risk of property loss and attached liability.
Failure to timely process a client’s deposit check, resulting in the loss of potential investment gains.
Recommending unsuitable investments.
Recommending only those products which result in high fees to the planner.
Failure to adequately educate the client regarding investment risks, costs, and benefits.
Charging fees that were not first disclosed and agreed upon with the client.
Failure to monitor investments on the schedule agreed upon in the engagement letter.

In turn, these items can be flipped to create a checklist for the individual client:

Do you have adequate disability insurance?
Do you have adequate homeowners/rental/landlord insurance, car/boat/vehicle insurance, umbrella liability insurance?
After sending in money, did you follow-up to confirm that your funds were deposited and invested as promised?
Do you feel that you fully understand the investments made on your behalf? Do you understand why they are better than other alternatives?
Did you receive a clear list of all the fees charged?
Are you receiving updates that your investments being monitored as promised?

Photo by Reba Spike on Unsplash

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CFP Course Notes #2: Common Examples of Negligence by Financial Advisors from My Money Blog.