A new client walks in with a shoebox of receipts and a brother-in-law who told them to buy Bitcoin. The CFP Board answered "where do you start?" with a structured seven-step process that governs every engagement.
The CFP Board codifies financial planning as a seven-step process. Your fiduciary duty requires you to follow these steps in order. The exam tests whether you know which step a planner is performing and what happens when steps get skipped.
HIGH-FREQUENCY: The seven-step sequence and the boundaries between steps appear on virtually every CFP exam. Know the verbs.
You collect two streams of data simultaneously:
- Quantitative: income, assets, liabilities, tax returns, insurance policies, employee benefits, estate documents
- Qualitative: values, risk tolerance, family dynamics, health concerns, beliefs about money
A client with 1 million and high risk tolerance. Skipping tax returns and then recommending a Roth conversion is a process violation, not a tactical error.
Common mistakes
- Confusing which step a planner is performing. During data gathering, a planner discovers outdated beneficiary designations listing an ex-wife. Evaluating how this affects the plan is Step 3 (analysis), not Step 1 (data gathering), even though the discovery happened in a gathering meeting. Collecting information is Step 1. Evaluating its implications is Step 3.
- Treating the process as linear and terminal. A planner who completes implementation and considers the engagement finished has missed Step 7. Trap: Answer choices describing the engagement as "complete" after implementation are almost always wrong.
- Confusing limited scope with reduced duty. The scope can be narrow. The fiduciary duty within that scope is full. Trap: "Reduced standard of care" for limited engagements is wrong.
Bottom line
- Seven steps in order: Understand, Identify goals, Analyze, Develop, Present, Implement, Monitor.
- Steps 4 (develop) and 5 (present) are distinct: development is strategy, presentation is communication and consent.
- Step 1 requires both quantitative and qualitative data; missing either stream leaves the engagement incomplete.
- Limited-scope engagements still carry full fiduciary duty within the agreed scope.
Exam shortcut
When a question describes a planner recommending something before collecting key data, the answer is a Step 1 or Step 3 failure. Match the verb in the question stem to the step: "analyzing" is Step 3, "presenting" is Step 5, "tracking progress" is Step 7. The verbs are the Board's signposts. Step verb test: Collecting = 1. Prioritizing = 2. Projecting = 3. Crafting = 4. Communicating = 5.
The full lesson (about 1,933 words, 13 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- B.7
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