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FPSB India - Financial Planning Standards Board India

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CFP Certification Education Program Syllabus

» Module I - Introduction to Financial Plarming

» Module II - Risk Analysis & Insurance Planning

» Module III - Retirement Planning & Employees Benefits

» Module IV - Investment Planning

» Module V - Tax Planning & Estate Plarming

» Module VI - Advanced Financial Planning

Introduction to Financial Planning

COURSE DESCRIPTION: This module would serve as an introduction to Financial Planning.

The module would cover the six-step process which includes Financial Planning process, client

interactions, t ime value of money applications, personal financial statements, cash flow and debt

management, asset acquisition, education planning, overview of risk management investment

planning and retirement planning, special circumstances, plan integration, ethics, and business

aspects of Financial Plann ing,

LEARNING OBJECTIVES:At the end of this module, a student should be able to:

1. To implement the Financial Planning process, while following the CFP Board's Financial

Planning Practise Standards and Code of Ethics and Professional Responsibility.

2. Understand the economic, social, political, and technological environment and be able to

determine how Financial Plans should accorrnnodate those environments.

3. Understand the potential goals a client may have, he1p them enunciate their goals and

evaluate strategies to he1p clients achieve their goals.

4. Understand basic investment topics (including investment types, risk and return,

diversification, passive versus active management) and specific investment strategies

necessary to allow clients a mechanism to achieve realistic goals.5. To structure and choose the optimal business format for the delivery of Financial Planning

services for services for specific for specific target client markets.

Financial Plarming Process

1. Establishing client- planner relationships

a. Explain issues and concepts related to overall Financial Planning process, as appropriate

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to th e clie nt

b. Explain se rvice s provided, th e process of planning, docum entation required, and

d is cl os u re s ta temen t s

c. C larify clie nt's an d C FP lice ns ee 's re sp on sib ilitie s an d com p laint h an dling m e ch anism s

2 . G ath erin g clie nt d ata an d d ete rm i nin g g oals an d e xpe ctatio ns

a . O bta in in fu rm a tio n from clie nt th ro ug h in te rv iew /q ue stio nn aire a bo ut fin an cia l re so urce s &

obligat ions

b. D ete rm i ne clie nt's p erso nal an d fin an cial go als, ne eds and p rio ritie s

c. A sse ss clie nt's v alue s, attitud es an d e xp ectatio ns

d . D ete rm i ne clie nt's t ime horizons

e . D ete rm ine clie nt's risk tole rance le ve l

f Colle ct a pp lica ble c lie nt re co rd s a nd d ocum e nts

3. A naly se C lie nt O bje ctive s, N ee ds and F ina ncial S itua tion

a . A na ly sis o fre le va nt in fo rrn atio n

b. N eed for spe cialis t advice

c. Is su es th at re qu ire fiu th e r c la rifica tio n

4 . D eve lo pin g app ro priate strate gie s an d pre se ntin g th e F in an cial P lan

a . C lie nt's ris k to le ra nce

b. A ssessm ent of options

c. R es earch , a naly sis an d m o de lling

d . D raft F in ancial P lan

e . Pre se nting and re vie wing th e plan w ith th e clie nt

f Collaborat ing with th e client to ensure th at plan m e ets th e goals and obje ctives of th e

c lie n t, a nd re v is in g a s app ropria te

5 . Imp lem e ntin g th e F in an cia l P la n

a. A ssis t th e clie nt in im p le m e nting and re comm e nd atio ns

b. Coordinate as necessary with oth er profess ionals , such as accountants , a ttorneys , real

e state age nts, in ve stm e nt a dv is ors , s tock bro ke rs an d in surance ag en ts

6 . Monito rin g th e F in an cia l P la n

a. M on ito r an d e valu ate so und ne ss o f re co rrn ne nd atio ns

b. b. Review the progress of th e plan with th e c li en t






e. Liquidity

f Monitor and evaluate budgets

g. g. Compliance

12. Personal use asset management

a. Home equity

b. Types of mortgagesc. Buy vs. lease

d. Refinancing

e. Hire- purchase, etc.

f Consumer loans

g. g. Credit cards

13. Personal Financial Statement Analysis

14. Financial Mathematics

a. Calculate and interpret time value of money

b. Calculation of armuities

c. Loan repayment schedule

d. Inflation- adjusted interest rates

15. Economic environment and indicators

a. Inflation! deflation

b. Interest rates/yield curves

c. Equity investment and real return

d. Government monitory and fiscal policy

e. The impact of business cycles

f Key Indicators - 1agging,concurrent and leading

g. Financial institutions

16. Forms of business ownership/ entity re1ationships

a. Sole proprietorships

b. Partnerships

c. Limited liability companies

d. Trusts

e. Foundations/ exempt organizations

f Professional associations/ corporations

g. Cooperative societies






h . Others

17. Ways of tak ing title to property (sole, joint, comnunity, etc.)

a. Characteristics

b. Implications

18. Legal aspects of Financial Planning

a. Contracts

b. Negotiable instnnnents

c. Torts

d. Profe s s ional l iabi li ty

e. Fiduciary responsibility

f Agency law

g. Consumer protection

h . Investor protection/li>

Risk Analysis and Insurance Planning

COURSE DESCRIPTION:This module would cover the knowledge requirements relating to

insurance and risk analysis for a CFP certification It introduces students to risk analysis and

insurance decisions in personal Financial Planning. Planning for clients' exposures to mortality,heahh, disability, property, liability, and long term care risk is emphasized.

LEARNING OBJECTIVES:At the end of this module, a student should be able to:

1. Understand the role of the Financial Planner in the personal risk analysis process.

2. Implement insurance into a comprehensive, integrated Financial Plan

3. Identify and explain features of private and public insurance available to meet each

identified need.

4. Integrate the tax implications into insurance decisions.

5. Evaluate client insurance and risk analysis needs.

DETAILED SYLLABUS:

Risk Analysis

1. Introduction to Risk Analysis

a. Meaning of risk

b. Basic categories of risk






c. Types of pure risk

d. Property risk

e. LiabiIity risk

f Methods of handling risk

2. Insurance and Risk

a. Basic characteristics of insurance - pooling oflosses, risk transfer, indenmification

b. Requirements of insurable risks

c. Difference between insurance and gambling or hedging

d. Benefits and costs of insurance to society

e. Advantages and disadvantages of insurance in handling risks

3. Risk analysis Process

a. Meaning and objective ofrisk analysis

b. Steps in personal risk analysis

c. Risk control and risk financingd. Insurance market dynamics and the underwriting cycle

e. Loss forecasting using probabiIity and regression analysis, loss distributions, law of large

numbers

Insurance Concepts

4. Legal principles in insurance

a. Inderrmity

b. Insurable Interest

c. Subrogation

d. Utmost good Faith (representation, conceahnent, and warranty)

5. The Insurance contract

a. Requirements of an insurance contract

b. Distinct legal characteristics of an insurance contract

c. Basic parts of an insurance contract

d. Meaning of 'insured'

e. Endorsements/riders

f Connnon types of deductibles

g. Co-insurance - nature, purpose and problems

h . Other-insurance provisions

6. Legal LiabiIity

a. Intentional Torts






b. Absolute Liability

c. Law ofN egligence

d. Special tort liabilityproblems

e. Civiljustice system

Insurance Policies and Strategies

7. Identification of life, medical, householders, auto and other property and liability riskexposures

a. Gathering data on current insurances

b. Identifying client's insurance needs -life, disability and medical, property, liability, etc.

c. Analysis of current insurances

8. Personal property and liability insurance

a. Householders insurance

b. Motor vehicles insurance

c. Motor vehicles insurance and societyd. Other liabilityinsurance

e. Personal umbrella policy

f Overseas and travel insurance

9. Life insurance needs analysis

a. Human life approach

b. Needs approach

c. Capital needs analysis approach

10. Life insurance policy analysis

a. Types of life insurance policies

b. Life insurance policy provisions

c. Life insurance policy riders

d. Types, benefits and risks oflife insurance (including use of policy provisions and riders)

11. Life Insurance policy selection

a. Determining the cost of life insurance

b. Cost comparison method

c. Return on savings component

d. Taxation oflife insurance

e. Factors to consider while buying life insurance

12. Annuities

a. Difference between annuity and life insurance






b. Types of annuitie s

c. T ax atio n o f in div id ua l a nn uitie s

d . In div id ual R etire m e nt A cco un ts (IRAs) in th e in te rn atio nal con te xt

1 3. Med ic al i ns ura nc e

a. M edical e xpe nse s

b. Types of coverage

c. D ete rm i nation o f a pp ro priate cov erag e

d. Long te rm care insurance

e . P ers on al a ccid en t / D is ab ility -in com e in su ra nce

f Speci al l if e i ns u rance bene fi ts

g . F acto rs to co ns ide r w hile b uy in g m e dical in suran ce

14 . In sura nce o f b us in es s ris k

a. K ey person insurance

b . B us in es s a ss ets a nd lia bilitie s in su ra nce

1 5. Imp lem e ntin g a nd re view in g clie nt's in su ra nce

a . A dv is or a s firs t-lin e u nd erw rite r.

b. C om p le ting a pp lication fu rm s

c. Fre quency of re view

d . E sta blis hin g a nd imp lem e ntin g ch an ge s

e . H and lin g c1 aim s an d com plain ts

f Ongo ing re v iew

Env iro nm e n t o f a n In su ra nc e A dv is or

1 6. G ov ernm e nt re gu la tio n o f in su ra nc e

a. In su ran ce R egu lato ry and D eve lo pm e nt A uth ority (IRDA )

b. The Insurance Act

c. L aw s re garding insurance com p anie s in India

d. A gents and brokers

e . Agency law and procedures fur becom ing an agent

f Doctrine s o f w aiv er and e sto pp el

g. Functions of an age nt, pe rsonal de ve lopm e nt and be havioural aspe cts

h . Cod e o f p ro fe ss io na l e th ics a nd a dv ertis em e n ts

1 7. In su ra nc e P ric in g

a. O bjective ofrate m aking

b. D efin itio ns in rate m a king

c. B asis of rating in Indian conte xt

d . R ate m a kin g in p ro pe rty an d liab ility ins uran ce

e . Concept of tariff an d m a rk et ag re em e nt






f Rate mak ing in life insurance

18. Insurance Companies

a. Types of insurers

b. Rate mak ing

c. Underwriting

d. Production

e. Claim settlement

f Reinsurance

g. Investments

h . Financial reserves

L Selecting insurance companies

Retirement Planning and Employee Benefits

COURSE DESCRIPTION:This module would cover the knowledge requirements relating to

retirement planning and employee benefits fur a CFP professional The emphasis is on the

process ofweahh creation and the retirement planning and strategies for clients.

LEARNING OBJECTIVES: At the end of this module, a student should be able to:

a. Understand the importance of retirement planning for the pre-retirement accumulation

period and the actual retirement when the funds are used.b. Demonstrate the ability to provide a client with an evaluation of retirement needs.

c. Determine legal and tax requirements for a retirement plan to be considered qualified fur

income tax purposes.

d. Explain types of defined contribution and defined benefits qualified plans.

e. Compare personal savings plans used in the retirement planning process.

DETAILED CLASS OUTLINE:

Introduction to Retirement Planning

1. Issues in retirement planning

a. Importance of retirement planning

b. Life expectancy and career stability

c. Pre-retirement counseling






2. Weahh creation

a. Wealth accumulation and erosion

b. Early retirement, l iving longer than expected, delaying retirement

c. Effect of inflation

Retirement Benefits

3. Types of plans

a. Defined benefit plans

b. Defined contribution plans

c. Defined benefits vis defined contribution plans, employer's and employee's perspectives

d. Trends and reasons for transition

e. Portability of plans

4. Defined benefit plans

a. Gratuity and the Payment of Gratuity Act, 1972

b. Leave Salary

c. Retrenchment compensation and the Industrial Disputes Act, 1947

d. Voluntary Retirement Scheme

e. Nature of defined benefit, tax issues in defined benefit plans, age/service requirements,

applicability of plans to clients

5. Defined contribution plans

a. Statutory provident fimd, Provident Fund Act, 1925

b. Recognized provident fimd, Employee Provident Fund and Miscellaneous Provisions Act,

1952, Employees' Provident Fund Organization, features, mode of operation and

investment norms

c. Unrecognized provident fund

d. Employees' Pension Scheme, 1995, features, fimding of scheme

e. Employees' Deposit Linked Insurance Scheme, 1976, features, fimding of scheme

f Public Provident Fund, features

g. Nature of defined contribution, tax issues in defined contribution plans, withdrawal norms,

applicability of plans to clients

6. Superannuation and other retirement plans

a. Trust fimds - fiduciary responsibilities

b. Approved superannuation fimds






11. Need for reforms

a. Demographic trends

b. Coverage ofpopulation, organized and unorganized sectors, employment trends

c. Un- fimded pension liabilities

d. Deficiencies in existing schemes

12. Reform proposals

a. Project OASIS and it s reconnnendations

b. World Bank's reconnnendations, nrulti-pillar reforms, Chilean model

c. Pensions Authority

d. The role of the state - developmental state (East Asia), welfare state (Europe and North

America), minimalist state (Europe and N orth America)

Investment Planning

COURSE DESCRIPTION: This module includes introduction to Investment Planning,

Investment vehicles, investment strategies, Regulation of an investment advisor, Application to

clients, etc.


1. Understand the importance of investment planning in the Financial Planning process, ethical

issues for advisors, regulation of advisors.

2. Understand the choice ofinvestment products in terms of their risk-return characteristics.

3. Evaluate investment choices in the context of client's Financial Planning needs.

4. Understand how client investment portfolios are created, monitored and rebalanced based

on their objectives and needs.

5. Reconnnend a portfolio of investment products.


Introduction to Investment Planning

1. How investment planning is different from selling investment products

2. Investment risk

a. Definition of risk






a. Forms of real estate investment

b. Financing real estate

c. Costs ofbuying and maintaining

14. Other investments

a. Bullion

b. Collectibles

c. Precious metals

Investment strategies

15. Active and passive strategies

a. Market timing

b. Securities selection

c. Maturity selection

d. Buy/hold

16. Asset allocation

a. Strategic and tactical asset allocation

b. Fixed and flexible allocation

c. Rebalancing strategies

d. Formulae based monitoring and revision ofportfolios

Regulation of an investment advisor

17. The regulatory fimctions, rules and codes of conduct pertaining to planners

a. Banks: RBI

b. Mutual fimds and collective investment schemes: SEBI

c. Equity shares: SEBI

d. Derivatives: SEBIe. Grievance mechanisms

Application to clients

18. Matching investment vehicles to needs of clients

a. Asset allocation and portfolio rebalancing according to client needs

b. Case studies






o Single persons

o Young couples

o Mature couples with grown children

o Empty nesters

Tax Planning & Estate Planning

COURSE DESCRIPTION: This module would cover the knowledge requirements relating to

tax planning and estate planning for a CFP professional


1. Evaluate the appropriateness of tax strategies for individual family situations.

2. Integrate tax planning into the six step Financial Planning process.

3. To understand the universal nature of estate planning needs.4. To recognize the high level of ignorance regarding estate planning among the general

population as well as students.

5. To comprehend the fimdamentalobjective of greater efficiency in wealth transfer.


Tax Planning Considerations

1. Ethical considerations in tax planning

a. Privileged comnnmications

b. Dangers of tax evasion

2. Tax compliance matters

a. Filing tax returns and documentation

b. Advance tax

c. The audit process

d. Refund of income tax

e. Judicial review

3. Taxation terminology

a. Inclusions

b. Exclusions

c. Deductions

Tax Computations

4. Tax calculations and special rules






a. Gross income

b. Adjusted gross income

c. Itemized deductions

d. Taxable income

e. Tax liability

f Clubbing of Income

5. Tax characteristics of business forms

a. Sole proprietorship

b. General partnership

c. Limited liability companies

d. Trusts

e. Foundations/exempt organizations

f Professional associations/corporations

g. Co-operative Societies

h . Others

6. Non Resident Indians (NRIs)

a. Residential status of individuals

b. Types of'accounts for non-residents

c. Investment opportunities for non-residents

d. Tax implication for non- residents

7. Heads of income

a. Salaries

b. Income from other sources

c. Capital gains

d. Business/ profession

e. House property

f Interest on government securities

8. Capital Gains tax rules

a. Determination of gain or loss

b. Characterization of gain or loss

c. Netting rules

d. Indexation benefits

e. Capital loss limitations






h . Other liability insurance needs and current coverage (e.g., umbrella, professional, errors

and omissions, directors and officers)

E. Retirement

a. Current retirement plan tax exposures

b. Current retirement plans

c. Retirement strategies

F. Employee benefits

a. Available employee benefits

b. Current participation in employee benefits

G. Investments

a. Current investments

b. Current investment strategies and policies

H. Taxation

a. Tax returns

b. Current Tax strategies

c. Tax compliance status (e.g., estimated tax)d. Current tax liabilities

1. Estate planning

a. Estate planning documents

b. Estate planning strategies

4. Analyze Client Objectives, Needs and Financial Situation

a. Analysis of relevant information

b. Need for specialist advice

c. Issues that require further clarification

5. Developing and presenting the Financial Plan






8. Income tax

a. Projections

b. Recommendations

c. Projections with strategy reconnnendations

9. Employee benefits

a. Projections

10. Asset allocation

a. Statement

b. Strategy reconnnendations

c. Statement with reconnnendations

11. Investment

a. Recommendations

b. Policy statement

c. Policy statement with reconnnendations

12. Risk

a. Assessment

b. Recommendations

13. List ofprioritized action items

a. Presenting and reviewing the plan with the client

b. Collaborating with the client to ensure that plan meets the goals and objectives of the

client, and revising as appropriate

6. Implementing the Financial Plan

a. Assist the client in implementing and recommendations

b. Coordinate as necessary with other professionals, such as accountants, attorneys, real

estate agents, investment advisors, stock brokers and insurance agents






7 . Mon ito rin g th e F in an cia l P lan

a. M onitor and e valuate soun dne ss of re corrnn end ation s

b. Review the progress of the plan w ith th e client

c. D iscuss and evaluate changes in client's personal circum stances, (e .g., birth ! death , age ,

i lln e ss , d ivo rc e , r et ir emen t )

d. R evie w and e valuate ch anging tax law an d e co nom ic circum stan ce s

e . Mak e re co nn ne nd atio ns to accommo date new or ch ang ing circum s tance s

Mi sc e llaneous Topi cs

8 . In te rn et R e sourc es

a. Inte rne t usage and application

b. Transactions over the net

c. Issues of se curity

d . F in an cial P la nn in g u sin g th e In te rn et

9 . F ore ig n e xch an ge is su es fo r in div id uals

a. Fore ign Exch ange M anagem ent A ct (FEMA)

b. Curre ncy risk m anage m ent

1 0. F in an cia l P lan nin g fu r s pe cial n ee ds a nd clie nts

a . In div id ual life cycle

b . F in an cial P la nn in g fu r u nma rrie d clie nts , s in gle p are nts , w id ow s/w id ow ers , e tc.

c. F in ancial P lanning fur re turn ing N o n R es ide nt In dians

d. O th er spe cial nee ds and options (e .g., divorce , bankruptcy)

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