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

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

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

Answer: (B)

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.

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.