Ethical to do this?

whew1110

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Howd

If the judge wants the client to have see a professional financial planner, presumably that is because the client needs to know about suitability of the investment, and not simply whether it is or isn’t a misrepresented product.
I’m not fully versed in structured products, but one reason explained to me about how CDOs could turn turd-like debt magically into AAA investible gold was because the AAA rating was only about the special-purpose-vehicle’s ability to pay out whatever the contract said it was supposed to pay (which would change depending on default rates) - it said nothing about whether the cash flows they were supposed to pay would resemble anything like the cash flows of traditional AAA bonds.  I.e. everything in the CDO goes bust and I don’t pay you - that’s fine, because the contract says I don’t have to pay you anything in that case.  My chance of defaulting on my contracts is equivalent to AAA because I never promised I’d pay if someone else went bust, but your money is still gone.  
When people would ask about “is my money safe, because the underlying collateral looks a lot more dodgy than usual AAA rated stuff,” marketers would say something along the lines of “mumble, mumble, mumble, low correlation, mumble mumble, so it’s AAA and a great interest rate, how much should I put you in for?  How about your full fixed-income allocation?”
My point being that just because the price is accurate and the interest rate is accurate doesn’t mean that the investment is suitable, and a financial planner needs to get a sense of the clients’ needs and risk tolerance to make that judgement.
And the CFA code of ethics says that it is unethical give investment advice to clients without considering their needs and risk tolerances, whether you are paid or not.  Though you can often get out of this with appropriate disclaimer language.  When I’m asked stuff casually, I’ll often say “I can’t reallly say if it’s appropriate for you without more information about your needs and risk tolerances, but on its own merits, this particular investment seems good/bad/reasonable/risky, and can make sense for those who don’t have similar exposure elsewhere and are comfortable with the level of risk it represents.”  If it’s risky but with enough expected return to justify some exposure, then you say a small allocation can make sense in some cases, provided the investor understand what risks come with it.

mkytz15

I would imagine that the reason that the judge asked Mr. ______ to consult a financial planner is because the judge wanted him to understand the financial implications of such a transaction.  It doesn’t sound like you fit the bill, because you’re not advising him on how this fits into his financial situation.
That being said, I still don’t think you’re doing anything unethical.  You stated your qualifications, your compensation (which is NOT a contingent fee), and declined to give an opinion.  Doesn’t sound like a violation of ethics to me, just sounds like it’s not exactly what the judge ordered.
If Mr. _______consults with you, and you write the letter containing your numbers and the judge says that it’s okay, I don’t think there’s anything unethical about the situation.

genuinecfa

If you are giving the advice to the bank and simply stating to the bank that you’ve established that the PV is X under discount rate assumption Y, then you’re fine.
If you are giving the advice to the end client, then you have to consider not simply the accuracy of the prospectus, but also investment suitability for the client, which means understaning their financial objectives and risk tolerance and how it fits into their other investments, letting them ask you questions and making an honest effort to gauge whether the client is asking the right questions for their financial situation.  And, typically, all of this ultimately requires rendering some kind opinion, along with a statement of what the risks are.
That’s what the CFA standards of practice say.  As far as whether it’s good enough for the judge, that’s a different story.  Will the judge decide that CFA is equivalent to a financial planner?  It’s probably the bank that faces the liability there, not you, but it is still worth considering.

Viceroy

Why is there a judge involved in the first place?

ayaz_mahmud369

You should not do it because you are not a professional financial planner.

Analyze_This

A financial professional is very different from a professional financial planner.
And if you poke the fire long enough, you are likely to rouse some opinions about the professionalism of financial planners.

hoangvu90

Does it make sense to pull a Richard Nixon if you are cornered on this? For instance, the conversation could go something like this:
Designated Officer: “So what in a sense you’re saying is that there are certain situations…where a Charterholder can decide that it’s in the best interests of the client or something, can do something unethical?”
You: “Well, when a Charterholder does it, that means that it is not unethical.”
DISCLAIMER: The above situation does not constitute actual advice to the OP. The dialogue is merely presented for comedic effect, and in no way is a recommended approach in handling a similar situation which may or may not be faced by an actual Charterholder.

bchadwick

“@TSNY
You first said, (I  quote) “The judge’s exact request was: ”The Court directs Mr. ______ to speak with a professional financial planner before the Court will consider granting the application.”
and then you quoted the  in email saying, “ Per our discussion, the judge simply requested that Mr. ______ speaks to a financial professional regarding his transaction with us.
Now whole legitimacy of your right to reply depends on which one is true. A CFA Charter holder is a ‘finacial prefoessionl’ and not a ‘qualified financial planner’  which is as true as any ’ Certified Financial Planner’ is not a qualified ‘financial analyst’.
So, bchad , DoW and andytrader  are right in discouraging you to misrepresent for the sake of $500. Think over and answer yourself  “Are you qualified (CFA charter or no charter, because what you are doing is fundamental calculation which any finance person can do) to give justifiable comprehensive in-depth advice on the mattter, if asked to do so again, not merely half-baked opinion with limited scope and perview?” Unless you have been a finacial planner or otherwise qulaified to do financial planning per se, I don’t think so.

dvilayphet

It seems to me that you are being “expertised”, and as such the judge will regard anything you say or do as your expert opinion.  If you aren’t willing to offer an opinion, you add no value to your friend’s company.