3. LEARNING OUTCOMES FOR THE AREAS OF COMPETENCE
The EFPA European Financial Advisor / Financial Planner is expected to behave in accordance with the overall
performance requirements of the following framework for the learning outcomes.
3.1.
Investment and Investment Risk
Area of Competence 1: Investment and Investment Risk
Aim: The aim of this section is to provide the financial advisor / financial planner with the background required to understand and analyse the
most important financial assets (bonds, stocks, derivatives) and its risk/return profile, being able to assess its adequacy to his client’s portfolio.
Basic principles of macro economics, fiscal and monetary policy and risk theory are included.
Coverage:
§ Understand the Macro-Economic Factors that affect Investment Returns
§ Investment Principles
§ Financial assets
§ Risk vs. Return
§ Fundamentals of Derivatives
1.1 Understand the Macro-Economic Factors that affect Investment Returns
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Economic factors
Inflation
Deflation
Interest rates
Yield curve and term structure
Yield curve theories
Understand the economic factors which affect investment markets and its relation with
values and returns of financial products. These economic factors include GDP (and its
components), CPI (consumer price index), employment, budget deficit, exports, etc.
Identify inflation drivers (consumption, production, raw materials, interest rates, etc) and
how it affects stocks and bonds market.
Identify deflation drivers and how it affects stocks and bonds market.
Explain how interest rates movements affects stocks and bonds market, and its
consequences on clients’ investment plan.
§ Describe the yield curve, how it is constructed, its slope and the drivers behind its
movements
§ Calculate and explain forward rates from spot rates
Explain the basics theories about yield curve profile (pure expectations, market
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 5 of 60
Cognitive
Level
Understand
Understand
Understand
Understand
Analysis
Analysis
Monetary policy
Exchange rates
Fiscal policy
Business cycles
1.2 Investment Principles
Topic
Basic investment principles
segmentation and liquidity preference).
Identify ECB monetary policy goals and its key monetary instruments (short term
interest rate level, open market operations, market reserves)
Understand and analyse the meaning of spot exchange rates and forward exchange
rates
Explain the influence of taxes and government expenditure on expanding or contracting
the economy, and its effects on public sector balance.
Understand the different stages of business cycles and how to determine the benefits
and drawbacks of exposure to specific areas or cyclically dependent companies or
policies
Learning Outcome (The financial advisor / financial planner should be able to)
Investment objectives
Lifecycle changes
Analyse the overall set of principles or strategies that guide an investor (e.g. time frame,
liquidity constraints, risk aversion)
Explain the reasons why one investment principle is preferable to another in a given set
of economic or financial circumstances
Analyse the barriers which make employment of specific investments, investment
principles or investment policies impossible in given circumstances
Identify the various factors (such as age, wealth, time frame, financial literacy, family,
etc) that govern the decision making processes of the client and whether these attitudes
are consistent with the personal and financial goals of the client
Analyse the client’s investment objectives and its relation with overall client’s portfolio.
Appraise how lifecycle changes may affect the stated investment objectives
1.3 Financial assets
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Choice of investment strategy
Investor constraints and attitudes
Decision making process
Common Stock
Preferred stocks
Stock market structure
Market indices
Analyse the characteristics of common stock (issuer, dividends, benefits, price, volume,
market where is listed, etc) and the risks and rewards of investing in common stock
Analyse the differences between preferred and common stock and how its pricing is
affected.
Describe the assets traded, market members (brokers, dealers, clearing houses,
depositaries) and how stocks are bought and sell (type of orders)
Describe national stock indices and key European and international indices (Eurostoxx,
FTSE, Dow Jones, S&P500, Nikkei, etc.
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 6 of 60
Understand
Analysis
Understand
Understand
Cognitive
Level
Analysis
Application
Analysis
Analysis
Analysis
Analysis
Cognitive
Level
Analysis
Analysis
Understand
Understand
Stock valuation
Stock ratios
Choice of stock
Bonds
Fixed income market structure
Valuation process
Bonds duration
Bonds risk
Legal characteristics
Investment vehicles (where
applicable)
Deposits
1.4 Risk vs. Return
Topic
Principles of risk and return
Diversification
Measurement of risk
Influence of time on investment risk
Risk tolerance
Life cycle
Special circumstances
Types of investment risk
Analyse how common stocks are valued and calculate the stock price based on Gordon
Shapiro model (Dividend discount model).
Calculate and describe key stock ratios such as price to earnings, price to cash flow,
price to book value, earnings yield gap, dividend yield, return on assets, return on
equity.
Analyse which stocks are right for the client in the context of its constraints and portfolio.
Analyse key characteristics of bonds (issuer, rating, yield, coupon, maturity, sector,
quotation, spread)and the risks and rewards of investing in bonds
Understand bonds issuance, public issuers, private issuers, liquidity, asset backed
securities, etc
Understand how bonds are valued and be able to calculate a plain vanilla bond price
and the factors that cause bond prices to fluctuate
Calculate the impact of interest rate changes on bond performance through duration and
modified duration.
Explain others bond investment risk such as: sell before maturity, reinvestment, inflation
and credit risk.
Evaluate the legal characteristics of bonds
Understand the various investment vehicles available to the client and be able to explain
how they function in a comprehensive investment portfolio
Understand the various forms of deposits, their maturity and tax implication.
Learning Outcome (The financial advisor / financial planner should be able to)
Explain the fundamentals of the relationship between risk and return, and the trade-off
the investor faces among these concepts
Identify the variables which increase or diminish risk in the context of client’s portfolio.
Calculate the standard deviation of one asset and of a two-asset portfolio.
Explain the role of a long term investment on diminishing the investment risk
Evaluate the levels of risk tolerance the client expresses against stated financial and
personal objectives
Understand the tolerance levels within clients’ life-cycle and adjust according to stated
and unstated factors at play
Understand special circumstances which might affect the tolerance level of the client
such as: marriage, children, divorce, health problems, parents health, etc)
Explain the types of investment risks such as: market, credit, inflation, liquidity, interest
rate, etc.
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 7 of 60
Analysis
Analysis /
Application
Analysis
Analysis
Understand
Understand /
Application
Application
Analysis
Analysis
Analysis
Understand
Cognitive
Level
Understand
Understand
Application
Understand
Analysis
Application
Understand
Understand
Principle of rates of return
Rates of return
1.5 Fundamentals of Derivatives
Topic
Derivatives
Derivatives markets
Exchange vs. Over The Counter
(OTC)
Participants
Pricing
Option models
Structured products
Analyse and calculate for a yearly periods and periods different from a year.
Analyse and calculate in broad terms the various rates of return of investments
(nominal, effective, real, annualized)
Application
Application
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the basic characteristics of derivatives
Understand how the various sectors of the derivatives markets work
Understand the difference between exchange and OTC traded markets
Understand who the participants in the derivatives market are and how they use
derivatives
Understand the pricing of futures, swaps and options
Understand how option models work
Understand how products can be combined to create other products
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Understand
Understand
Page 8 of 60
3.2.
Funds
Area of Competence 2: Funds
Aim: The aim of this section is to provide the financial advisor / financial planner with a comprehensive background to funds as a very important
asset in his/her client’s portfolio. It is important to understand not only what a mutual fund is, but how it works, agents involved and key
differences among them. Also, the advisor should have skills and tools to pick up the best fund according with his/her client objectives and
constrains.
Coverage:
§ Mutual funds overview
§ Mutual funds and their investment objectives
§ Analysis and Selection of funds
§ Hedge funds
2.1 Mutual funds overview
Topic
Mutual funds pros and cons
Operational aspects
Performance measurement
Characteristics of mutual funds
Investing in mutual funds
Costs
Administration of mutual funds
Net asset value (NAV)
Documentation
Learning Outcome (the financial advisor should be able to)
Understand the advantages and disadvantages of investing in a mutual fund, comparing
with investment directly in stocks or bonds.
Describe how mutual fund transactions are performed and why liquidation day is the
same or after operational day.
Calculate how past and current performance is measured and how to annualize
cumulative returns of more than one year.
Describe the principal characteristics of mutual funds such as: legal entity, economies
of scale, diversification, access to asset managers, highly regulated sector, liquidity, etc.
Identify the different channels through which to make investments in mutual funds and
the concept of “open architecture” on mutual fund investments.
Explain the costs associated to investment in funds such as: management fees, custody
fees, purchase and redemption fees, mutual fund taxation, audit, brokerage cost, etc.
Understand the role of management companies and depositaries regarding the
administration of mutual funds.
Describe how the net asset value (NAV) is calculated, which costs are included and
how are charged to the fund.
Explain the content of prospectuses, quarterly reports and factsheets, KIID, and be able
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 9 of 60
Cognitive
Level
Understand
Understand
Application
Understand
Understand
Understand
Understand
Understand
Understand
Open ended funds
Load and no load funds
Record and trade dates
Special Identification Method
Average Cost Method
First-in / First-Out (FIFO) Method
Double Category
Selecting a Cost Basis Method
to explain to a client all information contained on these documentation.
Recognize the differences between open ended and closed ended mutual funds
Understand the meaning of the term ‘load’ in association with mutual funds
Explain the meaning and purpose of record and trade dates
Explain the Specific Identification Method and how it works
Explain the Average Cost (Single-Category) Method and how it works
Explain the First-In / First-Out (FIFO) Method and how it works
Explain the Average Cost (Double-Category) Method and how it works
Differentiate and select a Cost-Basis Method and how it works
Understand
Understand
Understand
Understand
Understand
Understand
Understand
Analysis
2.2 Mutual funds and their investment objectives
Topic
Learning Outcome (The financial advisor should be able to)
Types of funds
Investment objectives
Composition of mutual funds
Distinguish the different types of mutual funds available on the market: equity, bonds,
balanced, relative value, funds of funds, Exchange Traded Funds, etc.
Apprise the way how a specific mutual fund can meet the specific needs of a client
Identify what types of securities can be included in a mutual fund portfolio and the
degree of diversification of these securities.
2.3 Analysis and Selection of Funds
Topic
Selection of funds
Fund ratings
Fund ranking
Fund ratios and performance
statistics
2.4 Hedge Funds
Topic
Hedge funds concept
Hedge funds Vs Mutual funds
Learning Outcome (The financial advisor should be able to)
Propose a suitable funds in accordance with the client's specific circumstances
Describe how mutual funds are rated and the aspects evaluated by funds rating
agencies.
Describe funds ranking based on past performance, recognize its limitations and
characteristics
Calculate and explain the key mutual fund ratios: sharpe, treynor and information; and
other performance statistics such as beta, standard deviation, drawdown, etc
Learning Outcome (The financial advisor should be able to)
Analysis
Understand
Cognitive
Level
Application
Understand
Understand
Application
Cognitive
Level
Understand
Analysis
Explain the principles, and characteristics of hedge funds
Distinguish the principal differences between hedge funds and mutual funds
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive
Level
Analysis
Page 10 of 60
Hedge funds strategies
Describe the principal strategies of the hedge funds industry: relative value, market
neutral, convertibles arbitrage, fixed income arbitrage, distress securities, merger
arbitrage, long/short equity, global macro, CTA, etc.
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 11 of 60
Understand
3.3.
Portfolio Management
Area of Competence 3: Portfolio Management
Aim: The aim of this section is to provide the financial advisor / financial planner with a comprehensive background of portfolio management
providing him/her the understanding of the tools being used for the portfolio construction. Also, the candidate should be able to explain in plain
words to his/her client the key issues regarding the portfolio construction and performance.
Coverage:
§ Risk and Return on Portfolio level
§ Efficient Capital Markets
§ Portfolio Theory
§ Portfolio construction
§ Performance Measurement
§ Performance Information to Clients
3.1 Risk and Return on Portfolio level
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Return of an asset
Understand and calculate the historical (annualized and with dividends) and expected
(probabilities of scenarios) return of an asset.
Performance of a portfolio
Understand and calculate the performance of a portfolio, with and without changes in
each asset’s weight during the period.
Volatility of an asset
§ Explain and calculate the standard deviation (annualized) of an asset, knowing its
advantages and disadvantages as a measure of risk.
§ Explain the meaning of volatility when comparing two assets.
Volatility of a portfolio
Describe and calculate the volatility of a two-asset portfolio, with different correlations
between them, and also including the risk free asset.
Diversification
Explain the role of the correlation coefficient in a portfolio construction, and that risk
reduction does not depend only on the number of assets included.
3.2 Efficient Capital Markets
Topic
Efficient capital markets concept
Efficient market hypothesis
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the concept of an efficient capital market and the difference between
historical information, current public information and current private information.
Understand the characteristics of an efficient market
Explain the three forms of efficient market hypothesis: weak level, intermediate or semi
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive Level
Application
Application
Application
Understand
Application
Understand
Cognitive Level
Understand
Page 12 of 60
Understand
Consequences of market efficiency
3.3 Portfolio Theory
Topic
Principles of portfolio theory
Selecting clients’ portfolio
Asset’s and portfolio’s
characteristic line
Asset’s and portfolio’s systematic
and non-systematic risk
Capital Asset Pricing Model
(CAPM)
3.4 Portfolio construction
Topic
Investments restrictions
Economic cycle and asset
allocation
Active and passive management
Asset allocation
Strategic and tactical asset
allocation
strong level, and strong level.
Identify the consequences when the market is not efficient and which techniques
should be used at the different levels.
Understand
Learning Outcome (The financial advisor / financial planner should be able to)
Explain the most important hypothesis of the mean-variance portfolio model
(Markowitz)
§ Analyze the implications of the efficient frontier (maximize expected return based
on a given level of total risk)
Identify the types of investors according to their degree of risk aversion
§ Analyse an asset’s and portfolio’s characteristic line; understanding and being able
to apply its beta and alpha parameters.
§ Explain and calculate the expected return of an asset (and of a portfolio) on the
basis of its characteristic line.
§ Analyze how an asset (and portfolio) total risk can by split into systematic and nonsystematic risks
§ Analyze how the non-systematic risk can be diversified and how the systematic risk
can be managed.
§ Understand and calculate the theoretical return of an asset using the SML (Security
Market Line) and identifying wheather it is under or over valued.
§ Analyse the CML (Capital Market Line) as the efficient frontier in the CAPM model.
Cognitive Level
Understand
Learning Outcome (The financial advisor / financial planner should be able to)
Distinguish the legal and investments restrictions that may be imposed on a given
investor portfolio
Appraise the current and future economic cycle and its implications on the portfolio
asset allocation
Identify the advantages and disadvantages of active and passive management and
how to combine them in building a portfolio
Analyze the type of assets involved in a portfolio construction (stocks, bonds, money
market, foreign exchange, etc.) and how distribute them geographically and among
economic sectors
Understand how to make the allocation and periodic adjustments of the different
assets in a long term view (strategic) and how to get profit from short term market
opportunities (tactical)
Cognitive Level
Analysis
§
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Analysis
Understand
Application
Application
Analysis
Analysis
Application
Analysis
Page 13 of 60
Analysis
Understand
Analysis
Application
Basic steps on portfolio
construction
Benchmark
3.5 Performance measurement
Topic
Return measures
Risk-adjusted measures of return
Benchmarking
Performance attribution
Distinguish the key characteristics and relationship between asset allocation, security
selection and market timing in a portfolio construction
Explain the general characteristics of a benchmark and the most relevant market
benchmarks
Learning Outcome (The financial advisor / financial planner should be able to)
Understand and calculate the methods used to measure returns of assets and
portfolios including Internal Rate of Return (IRR) and Geometric Rate of Return (GRR)
and how are affected by investment cash flows (inflows, outflows and reinvestments)
Describe and calculate the methods to measure return adjusted by risk such as
sharpe, treynor and information ratios
Analyze the performance of a portfolio in relation with its benchmark, including the
tracking error and Jensen’s alpha concept.
Understand the return added by the portfolio manager due to asset allocation or
security selection
3.6 Performance information to Clients
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Short and long term results
Explain the factors behind short and long term results
Global Investment Performance
Understand the purpose and content of the GIPS- the Global Investment Performance
Standard GIPS
Standards
Management consistency
Understand the implications of management consistency
Establishing and reaching client’s
Analyse the importance of establishing realistic client’s objectives and wheather they
objectives
have been reached (or not)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Analysis
Understand
Cognitive Level
Application
Application
Analysis
Understand
Cognitive Level
Understand
Understand
Page 14 of 60
Understand
Application
3.4.
Insurance
Area of Competence 4 : Insurance
Aim: The aim of this section is to provide the financial advisor / financial planner with a comprehensive background in insurance.
Coverage:
§ Principles of Insurance
§ Fundamentals of Risk Management
§ Legal and Financial Characteristics of Insurance
§ Tort liability as applied to insurance
§ Identification of life, health, homeowner and other liability risk exposure
§ Life insurance
§ Liability Insurance
§ Health Insurance
§ Corporate Insurance Plans
§ Insurance Regulation
§ Governmental and Professional Insurance Schemes
4.1 Principles of Insurance
Topic
Definition of pure risk
Major types of pure risk
Definition of insurable event/risk
Insurance premium
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the difference between pure risk and speculative risk
Identify and explain the different types of pure risk: personal risk, property risk,
legal/liability risk
Understand the main characteristics required for an event or risk to be insured
Define and describe the elements of the insurance premium
Understand
Understand
4.2 Fundamentals of Risk Management
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Treatment of risk
Risk management techniques
Analyse the pure risks faced by the client and the most appropriate techniques for
treating such risks
Analyse the concepts of avoidance, risk reduction / loss control, retention (assumption
of risk), non-insurance transfers, and insurance
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive
Level
Understand
Understand
Page 15 of 60
Cognitive
Level
Analysis
Analysis
Application of risk management
techniques
Deductibles
Apply the concepts of avoidance, loss control, retention, non-insurance transfers, and
insurance to the client’s specific circumstances
Understand deductibles and other cost sharing risk prevention devices
4.3 Legal and Financial Characteristics of Insurance
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Parties to an insurance contract
The legal framework of insurance
contracts
Types of insurer
Insurance distribution channels
Characteristics of contract
Recognize the main parties involved in an insurance contract and understand the legal
relationships between principles and agents as applied to insurance
Understand the concepts of insurable interest, of indemnity, of moral hazard, of
subrogation and how this principle affects the client especially with respect to torts and
tort actions, of contribution, of proximate cause, of fiduciary relationship and where it
applies
Understand the difference between the various kinds of private insurers and the effect
this may have on the choice of insurer for each client
Understand the various kinds of insurance distribution channels and their relationship
with the insurer and the insured
Understand the meaning of: aleatory contracts, unilateral contracts, conditional
contracts, personal contracts, and contracts of adhesion
4.4 Tort liability as applied to insurance
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Tort
Basic components of a tort liability
insurance contract
Legal obligations
Existing contracts
Understand what a tort (action) is and describe the main categories of torts
(negligence/intentional torts)
Understand the elements of insurance contracts and the benefits of the various forms of
insurance and insurance products from which the client may choose
Understand the legal obligations contracts create and the legal responsibilities of the
insurer and the insured
Understand how to evaluate existing insurance contracts
4.5 Identification of life, health, homeowner and other liability risk exposure
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Analysis of present risk coverage
Gaps in coverage
Potential loss of income to
Analyse the client’s current life, health, liability, property, etc. insurance coverage
Identify potential gaps in coverage of the client’s current policies
Evaluate the effect of events which lead to limited or total loss of income to the
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 16 of 60
Application
Understand
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Cognitive
Level
Understand
Understand
Understand
Analysis
Cognitive
Level
Analysis
Application
Analysis
individual/ family
Final expenses
Methods to avoid, reduce and
replace loss
4.6 Life insurance
Topic
Life insurance
Types of life insurance
Portability
Terminology and life insurance
policy provisions
Annuities
Types of settlement options
4.7 Liability Insurance
Topic
Personal liability
Personal liability exposure and
limits
Homeowners insurance
Homeowner insurance coverage
and limits
Merits of coverage
All risks vs. direct loss
Tenants
Deductibles
Loss settlements
Malpractice (professional liability)
individual/family
Evaluate the provisions the client has made to ensure that final expenses are
considered
Understand the non insurance provisions the client has made to avoid, reduce and
replace loss
Learning Outcome (The financial advisor / financial planner should be able to)
Understand how to determine the amount of life insurance the client needs and convert
the various family needs into specific amounts of life insurance
Understand the various sources from which life insurance can derive and the various
types of insurance contracts available on the market
Understand the meaning of portability of the insurance policy
Understand the main life assurance terminology and policy provisions
Analysis
Understand
Cognitive
Level
Understand /
Analysis
Understand
Understand the benefits and disadvantages of annuities
Understand and distinguish among fixed amount of option, fixed period option and for
life
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the various categories of personal liability
Analyse a client’s personal liability exposure and evaluate the limits of insurable liability
contained in existing or potential insurance and their suitability for the client
Understand the major types of policies available for homeowner and renters
Analyse what is covered under a policy and for what amounts and the limits of coverage
Understand the merits of homeowner coverage
Understand the advantages and disadvantages of all risks and direct loss policies
Understand the merits of homeowner coverage that provides for tenants’ personal loss
or damage as well as personal liability
Understand what deductibles are in place and how this affects overall coverage
Understand the methods for loss settlement and how to assist the client in managing the
acceptance and use of settlement funds
Understand the definition of professional malpractice
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 17 of 60
Understand
Understand
Understand
Understand
Cognitive
Level
Understand
Analysis
Understand
Analysis
Understand
Understand
Understand
Understand
Understand
Understand
insurance
4.8 Health Insurance
Topic
Individual health insurance policy
provisions
Employer sponsored health plansHealth insurance coverage
Medical expense insurance
coverage
Disability income coverage
Individual disability income
insurance
Long Term care insurance and
dread disease
4.9 Corporate Insurance Plans
Topic
Group life insurance coverage
options
Post-retirement coverage
4.10 Insurance Regulation
Topic
Insurance regulation
Areas subject to regulation
Types of regulation
Rules of conduct in the distribution
and selling of insurance products
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the types and limits of social health insurance available to the client
Cognitive
Level
Understand
Understand the types and limits of employer sponsored health plans and the coverage
or procedure limits for the client
Understand the client’s current health insurance coverage
Understand the characteristics of major medical insurance
Understand
Understand the definition of disability
Understand the major characteristics of individual disability income insurance
Understand
Understand
Understand
Understand
Analyse characteristics and operating schemes of Long Term Care insurance and dread
disease
Analysis
Learning Outcome (The financial advisor / financial planner should be able to)
Understand group life insurance coverage options
Cognitive
Level
Understand
Understand post retirement coverage
Understand
Learning Outcome (The financial advisor / financial planner should be able to)
Understand why the insurance companies are subjected to regulation
Understand what areas of insurance are regulated and who the regulators are
Understand the basic principles of relevant National and European regulations
Understand rules to follow when distributing, promoting insurance products
4.11 Governmental and Professional Insurance Schemes
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 18 of 60
Cognitive
Level
Understand
Understand
Understand
Understand
Cognitive
Level
Social security
Social security system
Limitation or reduction of benefits
Unemployment insurance
Injuries at work
Analyse the client’s eligibility for benefits
Understand how the social security system functions
Understand the reasons for limiting or reducing benefits
Understand how unemployment insurance functions
Understand what social provisions are in place if the employee is injured on the job
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 19 of 60
Understand
Understand
Understand
Understand
Understand
3.5.
Pensions and Retirement Planning
Area of Competence 5: Pensions and Retirement Planning
Aim: The aim of this section is to provide the financial advisor / financial planner with a comprehensive background on pension and retirement
planning.
Coverage:
§ Types of Retirement Plans
§ Retirement income and needs analysis
§ Distribution Options and Considerations
§ Retirement planning strategies and considerations
§ Employee Benefits
§ Pensions
§ Analysis of key factors affecting plan selection
§ Government Sponsored Plans
§ Annuities
5.1 Types of Retirement Plans
Topic
Retiring clients
Special retirement issues faced by
women
Qualifying and non-qualifying plan
Defined benefits and defined
contributions
Definition of earnings
Calculation methods
Types of retirement plans and
contribution limits
Factors affecting suitability (for
individuals or small enterprises)
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the challenges facing retiring clients and how to approach them
Understand the special circumstances that women face when planning for retirement
such as longer life expectations, lower income from retirement plans.
Understand the difference between a qualifying and non-qualifying plan
Understand within qualifying plans the meaning of ‘defined benefits plan’ and ‘defined
contribution plan’
Understand within a defined benefits plan the definitions of earnings used
Understand the methods used to calculate future annual retirement benefits
Understand the various retirement plans, including National, occupational and private
plans, which the client may choose from and Understand what kinds of contribution
limitations are in place for the client
Understand the motivations of the client as an owner of a business and what constitutes
an appropriate employee benefits plan
5.2 Retirement income and needs analysis
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 20 of 60
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Understand
Understand
Understand
Topic
Approach to client needs
Determination of financial
objectives at retirement
Needs analysis
Effect of inflation
Current sources of retirement
income
Generating additional income
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the special circumstances which make retirement needs evaluations
different for each client
Analyse the various financial, social, and psychological information provided by the
client and consider the best means to fund retirement
Understand the various methods for performing a retirement income needs analysis
Analyse the effect of inflation on retirement plans and be able to explain this to the client
Understand the various sources of retirement income
Understand the various means of obtaining additional funds needed to meet objectives
5.3 Distribution Options and Considerations
Pension distribution choices
Understand and analyse how to compare and weigh out pros and cons of lump sum or
annuity distribution
Legal constraints on distribution
Describe the existence of legal limits about distribution options
options
Available pre retirement distribution List the possible cases for pre-retirement distribution and understand the implications
options
5.4 Retirement planning strategies and considerations
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Saving and pension enhancement
strategies
Early retirement
Life insurance and pensions (where
applicable)
Health insurance and pensions
(where applicable)
Understand the circumstances that determine different capabilities of saving at different
stage in one’s life
Understand the psychological and financial dimensions of early retirement
Analyse the best means to manage the income tax issues associated with life
insurance and pensions
Analyse the best means to manage the income tax issues associated with health
insurance and pensions
Post-retirement employment
Plan selection
Income limitations (e.g. government
regulations controlling timing of or
amount of distribution)
Analyse the implications of post-retirement employment
Analyse key factors affecting plan selection
Understand income limitations
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive
Level
Understand
Analysis
Understand
Analysis
Understand
Understand
Analysis
Understand
Understand
Cognitive
Level
Understand
Understand
Analysis
Analysis
Analysis
Analysis
Understand
Page 21 of 60
5.5 Employee Benefits
Topic
Types of employee benefits
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the various pension and associated employment benefits that an employee
earns based on the employee’s years of service at a company
Cognitive
Level
Understand
5.6 Pensions
Topic
Defined contribution versus Defined
benefits
Evaluating client corporate pension
positions
Learning Outcome (The financial advisor / financial planner should be able to)
Define pension fund contributions and pension fund benefits
Cognitive
Level
Application
Evaluate the client's corporate pension position
Application
5.7 Key factors affecting plan selection
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Plan selection
Analyse the key factors affecting plan selection and make recommendations
Investment strategies
Identify and understand the different investment strategies provided by a pension
scheme
List expenses charged for participating in a pension scheme
Cost of participation in a pension
scheme
5.8 Government Sponsored Plans
Topic
Government Sponsored Plans
Cognitive
Level
Analyse /
Application
Understand
Understand
Learning Outcome (The financial advisor / financial planner should be able to)
Analyse Government Sponsored Plans
Cognitive
Level
Analysis
5.9 Annuities
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Annuity calculation
How to calculate pension annuity
Cognitive
Level
Application
Different types of pensions
Understand the different types of pension annuities (conventional annuity, enhanced
Understand
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 22 of 60
annuities
Inflation risk
annuity and alternatives to annuities where they exists)
Understand the existence and the ways of annuity protection from inflation risk
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Understand
Page 23 of 60
3.6.
Real Estate
Area of Competence 6: Real Estate
Aim: The aim of this section is to provide the financial advisor / financial planner with a comprehensive background to the purchase of real
estate.
Coverage:
§ Property purchasing, key elements from bid process to purchase agreement
§ Client types and matching client need to mortgage products
§ Regulation and laws concerning the provision of advice
6.1 Property purchasing, key elements from bid process to purchase agreement
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Purchasing, letting and finance
Information
Valuation
Pricing
Possession, letting and transfers
Types of loan
Easements
Land register
Purchase rules
Cancellation rights
Mortgages
Guarantees
Financing
Closed property funds
Understand the process of advising on the purchasing, letting and financing of real
estate
Understand the information available and how to identify missing information
Understand the basic principles of real estate valuation
Understand pricing in connection with selling and purchasing
Understand the rules of acquisition, taxation and financing of real estate in connection
with possession, letting and transfers
Understand the types of loan available for real estate purchases
Understand the contents, creation and termination of easements
Understand and knowledge of the principles of land registration, Understanding and
interpretation of the land registry expression
Understand real estate purchasing rules and involved parties
Understand the cancellation rules relating to real estate purchases
Understand the principles and key features of mortgages
Understand the requirements and functioning of guarantees
Understand the opportunities of financing, the risk, the risk-hedging and know the actual
conditions on the market
Understand the closed property funds and the principles and key features
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 24 of 60
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Understand
Understand
understand
Understand
Understand
Understand
Understand
Understand
Understand
Tax and costs
Asset class
Payment
Documentation
Understand the taxes and costs on real estate purchases, disposals and transfers
Understand real estate as own asset class and important part of the asset building, risk,
profitable opportunity
understand the money transfer, trust accounts
Understand the documentation required for the transfer of real estate ownership
6.2 Client types, and matching client need to mortgage products
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Types of property
Legal and financial aspects
Limits
Lender’s risk
Mortgage solutions
Current market situation
Valuation
Pricing
Contract
Customer need
Understand different types and categories of property, types of ownership and how to
distinguish between them
Understand the legal and financial aspects that are determined by the category of the
property and also know the limit values of mixed properties
Understand the financing limits of each category of property
Understand the different implications on the lender’s risk
Evaluate suitable mortgage solutions to meet specific client needs
Analyse the current market situation and find profitable real estats
What is the suitable assessment procedures and which information are necessary
Impact of different variables on the calculated price of the real estate
Assessment and creation of real estate contracts
Recognize the customer need and find suitable real estates, real estate projects
6.3 Regulation and laws concerning the provision of advice
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Roles and responsibilities
Legislation
Transfer and financing
Understand the roles and responsibilities of real estate agents and mortgage institutions
Understand the legislation applicable to real property
Understand the rules for transferring and financing real property
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 25 of 60
Understand
Understand
Understand
Understand
Cognitive
Level
Understand
Understand
Understand
Understand
Analysis
Analysis
Analysis
Analysis
Analysis
Analysis
Cognitive
Level
Understand
Understand
Understand
3.7.
Credit / Financing
Area of Competence 7: Credit / Financing
Aim: The aim of this section is to provide the financial advisor / financial planner with a comprehensive background to Credit / Financing.
Coverage:
§ Credit risks
§ Credit types / methods
§ Residential building financing
§ Leverage effect
§ Debt conversion
§ Collaterals
7.1 Credit risks
Topic
Types of credit risks
Effects of credit risks
7.2 Credit types / methods
Topic
Types of products
Interest rates
Interest rates - calculation
Credit Process
Foreign currency loans
Learning Outcome (The financial advisor / financial planner should be able to)
Know the different types of credit risks for lenders and debtors (country risk, market risk,
interest risk, operational risk, credit risk (contingency risk))
Understand the effects of the various risks and of various types of financing on the
liquidity and assets of the client
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the key features and benefits of different loans/mortgage products (non
certified/registered credit, loan/credit, non-revolving loan, open credit (revolving loan),
draft credit, foreign currency credit (with/without repayment vehicle), factoring, lease
(finance lease, operative lease))
Evaluate interest rate structure and their placement in different types of loans
Evaluate competitiveness and calculate interest rates for different types of loans
Know the process of granting various types of loans/credits
Understand the special risks/features of foreign currency loans
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 26 of 60
Cognitive
Level
Understand
Understand
Cognitive
Level
Understand
Analysis
Analysis
Understand
Understand
Regulations
7.3 Residential building financing
Topic
Credit Process
Hedging Interest Rates
Repayment Vehicles
Mortgage Loans
Regulations
7.4 Leverage effect
Topic
Leverage Effect
Risks
Assess Feasibility of use of
financing
7.5 Debt conversion
Topic
Process
Aspects
Regulations
7.6 Collaterals
Topic
Types
Process
Advantages/Disadvantages
Understand the regulations and laws involved in various credit types (e.g. consumer
protection)
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the stages of residential financing
Know the possibilities of hedging
Understand the mode of operation of repayment vehicles
Understand various types of mortgage loans and government housing grants
Know Regulations involved in residential financing (e.g. developers’ contract law)
Learning Outcome (The financial advisor / financial planner should be able to)
Understand the effect of using credit financing on return on equity
Know the risks of increased use of financing
Calculate examples and assess feasibility of use of debt financing
Learning Outcome (The financial advisor / financial planner should be able to)
Know steps of debt conversion (contractual agreement,...)
Understand important aspects of debt conversions (commitment periods, costs/fees,
prepayment compensation)
Know the regulations regarding debt conversions
Learning Outcome (The financial advisor / financial planner should be able to)
Know different types of collaterals, securities (e.g. personal securities (guarantee,
surety), property securities (lien, reservation of title, pledged property), loan insurance)
Understand the process of the use of the various securities
Know the advantages and disadvantages and costs of the various types of securities; be
able to evaluate the feasibility of the various types in individual client’s situation
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 27 of 60
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Cognitive
Level
Understand
Understand
Analysis /
Application
Cognitive
Level
Understand
Understand
Understand
Cognitive
Level
Understand
Understand
Understand
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 28 of 60
3.8.
Tax
Area of Competence 8: Tax
Aim: The aim of this section is to provide the financial advisor / financial planner with an extensive background about the tax implication of the
investment assets and how they affecting the client’s tax liability.
Coverage:
§ Overview on National and International tax system
§ Income tax
§ Inheritance tax
§ Other relevant taxes, e.g. property tax
§ Taxation of Insurance Products
§ Taxation of Investments
§ Taxation and Mutual Funds
§ Other Tax Issues
8.1 Overview on National and International tax system
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Taxes and client’s portfolio
Identify the different types of taxes the client may be exposed on the investments
process such as personal income tax, corporations tax, wealth tax (if applicable), tax
on international transactions, etc.
Investments tax optimization
Identify how optimize tax liabilities by applying gains or losses in certain fiscal years.
Tax advantage products
Recognize financial products with tax advantages and when they are appropriate for
client’s portfolio
Tax on international transactions
Explain the implications of international investments and how income and capital
gain/loss are incorporated on client’s tax form.
International tax agreements
Identify international tax agreements between countries and how are applied to a
specific situation
8.2 Income tax
Topic
Personal tax income
Learning Outcome (The financial advisor / financial planner should be able to)
Explain in detail the personal tax income structure and how different kinds of income
are treated.
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive Level
Understand
Understand
Analysis
Understand
Analysis
Cognitive Level
Understand
Page 29 of 60
Personal tax concepts
Tax benefits
Withholding tax
Joint or individual tax returns
Penalties and prescription
8.3 Inheritance tax
Topic
Relation with other taxes
Taxable event
Key concepts
Valuation goods and rights
Tax optimization
Explain the characteristics of personal income tax, distinguishing basic concepts such
as personal taxation, direct taxation and progressive taxation.
Identify all kind of tax benefits applicable to personal income tax whether or not are
related to financial products.
Identify the withholding tax applicable to certain incomes classed as capital gains or
losses.
Identify when is appropriate to present a joint tax return instead of individuals tax
returns
Recall the penalties and late-payment interest and prescription of tax liabilities
Understand
Learning Outcome (The financial advisor / financial planner should be able to)
Identify the relation of inheritance tax with other taxes such as personal income tax,
non-resident’s tax.
Recognize the different forms of taxable event: mortis causa acquisitions, inter vivos
acquisitions and revenues from life insurance policies.
Understand the concepts of taxpayer, successor, donor and donee.
Describe how the goods and rights are apprised on relation with this tax
Analyse different ways to optimize the inheritance tax
Cognitive Level
Understand
8.4 Other relevant taxes, e.g. property tax
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Corporate tax
Identify key components of corporate tax, especially in relation to small and medium
enterprises (SME’s)
Fiscal incentives
Understand the principal fiscal incentives, such as tax deductions or credits, especially
as regards the deduction for the reinvestment of extraordinary revenues, and
deductions for national and international double taxation.
Property tax
Understand the principal elements of property tax, limits, deductions and how to
optimize this tax liability
Understand
Understand
Understand
Understand
Understand
Analysis
Understand
Analysis
Cognitive Level
Understand
Understand
Understand
Understand
8.5 Taxation of Insurance Products
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Taxation of life assurance products Analyse the effect of life insurance product taxes on the client's overall financial
position
Taxation of income from life
Analyse the effect of taxation of income from life insurance on the client's position
insurance
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive Level
Analysis
Page 30 of 60
Analysis
Payouts
Withdrawal of funds
Estate taxation of life insurance
Ownership and beneficiary
designations
Taxation of annuities
Prevention or delay
Tax implications of individual
medical and disability insurance
Taxation of benefits
Corporate insurance taxation
8.6 Taxation of Investments
Topic
Tax considerations
Tax sheltered investments
Tax impact
Withholding tax
Method of calculation
f. Bank deposits
Fixed income
Stocks
Pension plans
8.7 Taxation of Mutual Funds
Topic
Understand the nature of payouts, their uses and the tax implications
Understand the tax implications and costs associated with withdrawal of funds from a
insurance policy.
Analyse the types of taxes that apply to life insurance as part of the total estate and the
reasons for life insurance’s inclusion in the estate
Analyse and be able to explain the effects of ownership and beneficiary designations
on estate taxes
Describe how annuities are taxed and its exemptions which affects the client’s overall
tax liability
Understand how to prevent or delay annuity taxation
Understand the tax implications of individual medical and disability insurance
Understand
Understand
Understand how health insurance benefits are taxed and the effect these taxes have
on the client
Identify the implications of being beneficiary in a corporate life insurance taxation
policy
Understand
Analysis
Analysis
Understand
Understand
Understand
Understand
Learning Outcome (The financial advisor / financial planner should be able to)
Analyse the tax considerations of investment products and vehicles being used by or
recommended to the client
Understand the various forms of tax sheltered investments available to the client
Assess the tax impact on time value analysis of investments
Describe how withholding tax affects overall financial returns and how are applied on
client’s tax returns
Understand the method of gain/loss calculation for tax purposes (FIFO, LIFO, etc)
Identify and calculate the tax liability from a bank deposit.
Identify and calculate the tax liability from coupons and principal redemption related to
bonds
Identify and calculate the tax liability from dividend payments and from profit/loss
income
Describe and calculate the tax implications (benefits) of investments on pension plans
and also the tax liability derived from redemptions
Cognitive Level
Analysis
Learning Outcome (The financial advisor / financial planner should be able to)
Cognitive Level
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Understand
Analysis
Application
Understand
Application
Application
Application
Application
Page 31 of 60
Taxation
Calculations
Income and capital gains
Control
Triggers
Reporting
8.8 Other Tax Issues
Topic
Tax implications of retirement plan
Tax implications of employee
benefits
Understand how mutual funds are taxed and how to minimise those taxes
Calculate taxes on mutual funds investments
Understand the difference between tax on income and capital gains
Understand how to control taxes with tax-efficient stock funds
Understand the actions that trigger taxes and tax consequences of mutual fund
transactions
Be able to report clients’ net gains and losses
Understand
Application
Understand
Understand
Understand
Analysis
Learning Outcome (The financial advisor / financial planner should be able to)
Analyse the tax implications on the retirement plan
Understand the tax implications of employee benefits
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive Level
Analysis
Understand
Page 32 of 60
3.9.
Laws, Regulations and Ethics
Area of Competence 9: Laws, Regulations and Ethics
Aim: The aim of this section is to provide the financial advisor / financial planner with a comprehensive background to laws, regulations and
ethics.
Coverage:
§ Professional liability
§ Ethics and Consumer Protection
§ EFPA Code of Ethics
§ Domestic Issues
§ Contract Law
§ Regulatory Frameworks of Investment Products in Europe
§ EU Directives
9.1 Professional Liability
Topic
Basic legal concepts
Regulation for advisors / planners
Intermediaries
Learning Outcome (The financial advisor / financial planner should be able to)
Use the rules that apply to the process of advising clients and Use the basic legal
concepts relevant to financial advice
Describe how the financial advisor / financial planner and his professional conduct is
regulated
Describe the rules of intermediaries and void contracts
9.2 Ethics and Consumer Protection
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Basic laws applicable to financial
products and services
The purpose and structure
of the financial services industry
Liability
Understand the rules of the laws of contract and tort
Explain the function of the financial services industry in the economy, the main
institutions/organisations and the purpose and position of clearing and settlement
organisations
Illustrate the rules of liability for damages when there is no contract and consumer
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 33 of 60
Cognitive
Level
Analysis
Understand
Understand
Cognitive
Level
Understand
Understand
Analysis
Data Protection
Anti-Money Laundering
9.3 EFPA Code of Ethics
Topic
EFPA Code of Ethics
9.4 Domestic Issues
Topic
Minors and incapacity
Assets and liabilities within
marriage
Assets and liabilities within legal
partnerships other than marriage
9.5 Contract Law
Topic
Definition of a contract
Types of contract
Governance
Breach
Enforcement
protection rules
Apply the principles and requirements of data protection legislation
In the process of Money Laundering, be able to apply measures against money
laundering, and initiatives taken by various organizations to combat terrorism
Application
Application
Learning Outcome (The financial advisor / financial planner should be able to)
Apply the principles of the EFPA Code of Ethics
Learning Outcome (The financial advisor / financial planner should be able to)
Use the rules about the legal position of minors and persons who have been declared
incapable of managing their own affairs
Illustrate assets and liabilities within marriage
Illustrate assets and liabilities within legal partnerships other than marriage
Central banks
Learning Outcome (The financial advisor / financial planner should be able to)
Describe the definition of a contract
Describe types of contracts
Describe what govern contracts
Describe breach of contract
Describe how contracts are enforced
Understand the effect of political and social factors on investment markets
Understand the role of governments in the behaviour of investment markets and in
determining monetary policy
Understand how central banks and banking systems function
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive
Level
Application
Analysis
Analysis
9.6 Regulatory Frameworks of Investment Products in Europe
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Political and social factors
Role of Governments
Cognitive
Level
Application
Page 34 of 60
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Cognitive
Level
Understand
Understand
Understand
Market trends
Changes to markets
Financial institutions
9.7 EU Directives
Topic
Implications
Understand how the relevant National, European and regional economic and financial
indicators affect market trends and positioning
Understand the effects of changes in the structure of markets and market participants
Understand the legal ability of various types of institutions to offer particular financial
products
Learning Outcome (The financial advisor / financial planner should be able to)
Illustrate the implications of EU Directives on financial services and products and their
local implementation
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 35 of 60
Understand
Understand
Understand
Cognitive
Level
Analysis
3.10. Assessing Client Needs and Developing a Financial Solution
Area of Competence 10: Assessing client needs and developing a financial solution
Aim: The aim of this section is to enable the financial advisor / financial planner to combine the requirements of Areas of Competence 1-9 in
order to assess client needs and produce a suitable financial solution for the client.
Coverage:
§ Establishing the client-advisor relationships
§ Gathering client data and determining goals and expectations
§ Determining the client’s financial status
§ Financial needs arising from e.g. Terminal illness, Education needs
§ Risk management needs and issues
§ Income taxation needs and issues
§ Investment needs and issues
§ Retirement needs and issues
§ Employee benefit needs and issues
§ Estate planning needs and issues
§ Developing and presenting a financial solution based on the client’s needs
§ Implementing the financial solutions
§ Monitoring the financial solution
10.1 Establishing the client-advisor relationships
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Terminology
Contractual relationship
Content of the financial advice
process
Services range
Life cycle method
Necessary information
Explain the various terminology used in the financial advice process
Explain and present a clear and concise overview of the contractual relationship
between client and the advisor
Explain what is a financial advice process with regard to steps e.g. clarification of goals
collection of data, necessary know how of the advisor etc.
Describe to the client precisely what services are possible to be provided
Understand and explain the “Life-Cycle Method” and its function in the development of a
financial solution for the client
Explain precisely what information is needed to develop a financial solution and why
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 36 of 60
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Understand
Ethical and legal obligations
Communication principles
Apply the ethical and legal obligations of the financial advisor / financial planner in the
relationship with clients
Apply the principles of interactive communication and to be able to define expectations
10.2 Gathering client data and determining goals and expectations
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Knowledge and skills for gathering
client data
Ability to apply the knowledge and skills necessary for obtaining information from clients,
effectively and efficiently, via interviews and questionnaires about the client’s financial
resources and obligations.
Explaining the collection of data
§ Explain the purpose of data collection and its value in client relationship
management.
§ Ability to apply the knowledge and skills necessary for explaining how the information
obtained is incorporated in the overall scheme of the client’s financial solution.
Asking right questions
Ability to apply the knowledge and appropriate skills for asking the right questions in
order to
§ identify the client’s personal goals for the future
§ identify the considerations to be taken into account in drawing up the client’s financial
advice
§ identify the specific details about the client and or family and or enterprise which may
be needed during the course of the financial advice process.
§ determine priorities regarding the personal, financial and particular considerations
that are of importance to the client’s financial advice
Forms of identification
Identify which forms of identification may be needed in the processing and submission
of formal request forms from financial services providers
Client’s attitudes and expectations
§ Understanding the client’s personal goals and fundamental motivations and
understanding whether these are based on reasonable financial grounds, or on other
beliefs and expectations, or on false reasoning and misunderstanding.
§ Ability to apply the knowledge and appropriate skills for recognising the client's
system of values.
§ Understanding the client’s attitudes that generate personal, financial and
professional motivations regarding present and future needs, expectations, and
personal and financial wishes.
Determining the client’s risk profile / § Understanding how a client feels regarding the risks that may be encountered during
tolerance level
his/her life.
§ Understanding whether the client has a reasonable comprehension of the types and
number of risks that may be encountered during his/her life.
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 37 of 60
Application
Application
Cognitive
Level
Application
Application
Application
Application
Understand
Application
Understand
Understand
Understanding how a client feels regarding the specific risks that may be
encountered, and how he/she would react in certain situations.
Understand the relevant data protection and privacy rights relating to the client’s
personal information
Store client data appropriately and compliantly
§
Data protection
Storage of client data
Understand
Application
10.3 Determining the client’s financial status
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Investment style and risk taking
behaviour
Current financial status
Capital needs
Risk exposure
Risk management
Analyse the client's attitudes and expectations, which may include past investment
behaviour, insurance cover taken out, purchases and sales of real estate, economic
expectations and the client's economic and financial knowledge.
§ Illustrate the structure of the client's present financial resources and obligations of all
types, including investments in securities, real estate, property and debts.
Furthermore insurance, pensions and social security benefits, taxation situation and
other relevant areas that may provide information about the client's financial
wellbeing.
§ Understand the assets the clients currently possesses and how these are allocated.
§ Understand the cash flow available to the client.
Calculate and analyse the current and expected capital expenditures and the financial
needs of the client
Calculate and analyse the current and future financial risk to which the client is exposed
and the factors at work which might change the financial risk
Analyse the provisions and structure the client currently has in place to manage his/her
exposure to risk
10.4 Financial needs arising from e.g. Terminal illness, Education, Philanthropy
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Terminal illness planning
Adult dependent needs
Disabled child needs
Divorce / remarriage considerations
Education needs
Understanding how and with what means clients could plan their finances should they
be confronted with a terminal illness.
Understand the financial provisions in place for adult dependency of himself/herself, a
spouse, a parent, others.
Understand the financial provisions in place for a disabled or dependent adult child
Understand how the client would be affected financially should he/she be confronted
with divorce or the possibility of remarriage
Understand the requirements the client has and the provisions made for the education
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 38 of 60
Cognitive
Level
Analysis
Understand /
Analysis
Application
Application
Analysis
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Charitable planning
Philanthropy needs
Closely held business planning
of children or other family members
Understand the types and methods of charitable planning in which the client has
participated or wishes to participate
Understanding the types and methods of philanthropic donations the client makes or
may make
Understand the relevant relationships in place in a closely held business and determine
how this fits in with the overall financial structure of the client
10.5 Risk management needs and issues
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Life insurance needs and current
coverage
Disability insurance needs and
current coverage
Health insurance needs and current
coverage
Long term care needs and current
coverage
Homeowners insurance needs and
current coverage
Commercial insurance needs and
current coverage
Analyse the current life insurance coverage possessed by the client and compare with
the client’s actual life insurance needs
Analyse the current disability insurance coverage possessed by client and compare with
the actual disability insurance needs
Analyse the current health insurance coverage possessed by the client and compare
with the actual health insurance needs
Analyse the current long-term care coverage possessed by the client and compare with
the actual long-term care needs
Understand the current homeowner insurance coverage possessed by the client and
compare with the actual homeowner insurance needs
Understand the current commercial insurance coverage possessed by the client and
compare with the actual commercial insurance needs
10.6 Income taxation needs and issues
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Tax documents and declarations
Tax liabilities and returns
Current tax strategies
Tax compliance
Understand the types of tax documents and declarations used by individuals,
households and privately held enterprises
Understanding the client's current tax liabilities and previous tax returns, understanding
the fiscal planning carried out and the extent to which this planning is optimal.
Analyse the current tax strategies utilised by the clients and the extent to which they are
functioning and whether a client should be referred to a specialist
Evaluate whether the client has remained in compliance with all tax obligations and be
able to determine the appropriate tax data for the client’s returns, referring to a specialist
if necessary.
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 39 of 60
Understand
Understand
Understand
Cognitive
Level
Analysis
Analysis
Analysis
Analysis
Understand
Understand
Cognitive
Level
Understand
Understand
Analysis
Analysis
10.7 Investment needs and issues
Topic
Investments
Current investment strategies
Current investment policies
10.8 Retirement needs and issues
Topic
Current retirement plan
Retirement related tax exposure
Social benefits
Retirement strategies including
pension enhancement strategies
Learning Outcome (The financial advisor / financial planner should be able to)
Analyse the structure of the client's current investment portfolio, including the type and
value of investments made, as well as the products and instruments bought or sold.
Analyse the investment strategies currently used by the client and consider future
options and policies
Analyse the investment policies currently used by the client and analyse the
appropriateness of this policy for the client’s life-cycle phase.
Learning Outcome (The financial advisor / financial planner should be able to)
Evaluate the current retirement plan of the client and the provisions taken to ensure
personal and financial goals can be met or consider appropriate changes
Understand the tax treatment of the pension plans available to the client
Understand the social and/or governmental benefits which form a part of the client’s
retirement plan and determine how they fit in with the rest of the retirement plan
Understand the retirement strategies that have been adopted by the client in the past
and consider other approaches which might improve them
10.9 Employee benefit needs and issues
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Available employee benefits
Current participation in employee
benefits
Analyse the employee benefits the client has available from his/her employer
Analyse the client’s current participation in the employee benefits his/her employer
offers and consider means to improve participation
10.10 Estate planning needs and issues
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Document characteristics of estate
planning
Estate tax exposures
Estate planning strategies
Understanding and being able to explain the meaning of the documents which are
required for estate planning.
Explain the elements that generate fiscal exposure.
Explain the elements of the estate planning strategies and recommend possible
improvements
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 40 of 60
Cognitive
Level
Analysis
Analysis
Analysis
Cognitive
Level
Application
Understand
Understand
Analysis
Cognitive
Level
Analysis
Analysis
Cognitive
Level
Understand
Understand
Understand
10.11 Developing and presenting a financial solution based on the client’s needs / life cycle
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Individual client solutions
Explain to clients how the financial advice process results in the development of a
specific or comprehensive solution appropriate to each individual client
Parameters for a asset / portfolio
§ Knowing the essential parameters for structuring the client's portfolio, his/her risk
structuring
profile, and the time scale for the investment goal(s) established.
§ Knowing how, taking fundamental parameters into account, the basic structure of a
portfolio may be determined.
Capital needs projections
§ Calculate the capital requirements of the client at decease, consider whether the
capital available at this time will provide the resource required.
§ Calculate the capital needs of the client or his family who has become disabled or
died and consider if the current preparations meet the requirements.
§ Calculate the amount of funds which must be available to the client upon retirement
and consider whether or not the client will have the funds needed under current
projections.
Recommendations for optimisation § Demonstrate how the financial position of the client could be optimised with focus on
risk and return; e.g. with disinvestments and new investments
§ Demonstrate how the cash flow of the client should be increased or decreased over
the planning period
§ Understand the elements determining the amount of income tax paid by the client
and consider means which might assist the client in employing the optimal income
tax strategy
§ Evaluate what appropriate means may be employed to improve the client’s overall
and tax positions
Preparation and presentation of
§ Prepare and present a clear, concise and comprehensive financial solution for the
recommendation
client with a clear to do list including a proper priority
§ Create all the documentation in a proper client specific way which takes into account
all the information obtained
§
10.12 Implementing the financial solutions
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Implementation
Purchase agreements
Apply best practices to ensure that recommendations are effective in a timely manner
and that the client understands any action taken on his/her behalf by an intermediary
Prepare purchase agreements on behalf of the client which have to be executed
afterwards
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 41 of 60
Cognitive
Level
Understand
Understand
Application
Understand /
Analysis /
Application
Application
Cognitive
Level
Application
Application
Professional limitations
Understand professional and technical limitations and where limitations become
apparent, refer to another/other professional(s)
Understand
10.13 Monitoring the financial solution
Topic
Learning Outcome (The financial advisor / financial planner should be able to)
Monitor the performance
§
§
Changes and review
§
§
Design how to monitor the performance of the solution
Apply the best practices and techniques for monitoring the financial solution with the
client
Understand the need to review the proposed and/or implemented solutions with the
client to ensure that it continues to meet his/her personal and financial goals, making
appropriate recommendations for changes if needed
Propose the changes needed to take account of any regulatory and/or legislative
changes to ensure that the financial solution remains up to date and compliant
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 42 of 60
Cognitive
Level
Application
Understand
3.11. Deepening / Enlargement of modules 1 - 9 (raising to EQF level 6)
Area of Competence 11: Deepening / Enlargement of modules 1 - 9 (raising to EQF level 6)
Aim: The aim of this section is to enable the financial planner to raise his / her professional competence to EQF level 6.
Coverage:
§ Deepening / Enlargement of Investments and Investment Risks
§ Deepening / Enlargement of Funds
§ Deepening / Enlargement of Portfolio Management
§ Deepening / Enlargement of Insurance
§ Deepening / Enlargement of Pensions and Retirement Planning
§ Deepening / Enlargement of Real Estate
§ Deepening / Enlargement of Credit / Financing
§ Deepening / Enlargement of Tax
§ Deepening / Enlargement of Laws, Regulations, Ethics and National law
11.1 Deepening / Enlargement of Investments and Investment Risks
Topic
Learning Outcome (The financial planner should be able to)
11.1.1 Fixed income
Floating Rate Notes
§
Inflation linked bonds
§
§
§
Convertible bonds
§
§
§
§
Cognitive
Level
Calculate the price of a floating rate note, based on coupon zero yield curve and
forward rates.
Apprise how interest rate, credit and liquidity risk affects FRN valuation.
Explain inflation linked bonds main characteristics such as: real yield, real coupon,
index ratio, accrued interest, index used (national or European), etc.
Calculate and analyze the Break Even Inflation Rate, as an element for investment
decision making and to “watch “inflation market expectations.
Analyze the inflation linked bonds role in a client’s portfolio
Explain convertible bonds main characteristics such as: conversion price, conversion
ratio, premium, delta, parity, bond floor, fair price, etc.
Identify a convertible bond as a hybrid asset, and its convexity in relation with the
stock price.
Analyze the convertible bonds role in a client’s portfolio
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 43 of 60
Application
Analysis
Application
Application
Analysis
Application
Analysis
Analysis
Credit Default Swap
§
§
Fixed income portfolio
management
§
§
§
§
11.1.2 Derivatives
Strategies with options
§
Greeks
§
Interest Rate Swaps
§
§
§
11.1.3 Commodities
Commodities as an investment
asset
Commodities investment
Commodities forwards pricing
Commodities in a portfolio
11.1.4 Private Equity
Main Characteristics
Understand the CDS structure and cash flows in case of credit event of the reference
entity.
Calculate the probability of default of the reference entity based on its CDS
quotation.
Analyze the CDS as hedge and investment asset.
Identify the yield curve shape (positive, inverted, flat, mixed), its drivers (explicatory
theories) and how can change over time (steeping, flattering, etc).
Understand and apply the more relevant strategies such as bullet, barbell, ladder
and switch.
Understand passive fixed income strategies such as immunization, cash flow
matching, indexation, buy and hold, etc.
Understanding
Understand and apply the basic strategies with options such as straddles, strangles
and spreads, identifying the maximum profit, loss and break even.
Understand and calculate how option premiums are affected by changes on
underlying asset (delta y Gama), volatility (Vega), time (theta) and interest rate (rho).
Calculate an overall portfolio position and how create a delta hedge portfolio.
Understand the position of a buyer and seller of an IRS and how can be used to
transform variable into fixed interest rates.
Calculate the liquidation of a periodic payment of an IRS and also its cash flows in
case of early cancelation.
Application
Application
Analysis
Understanding
Application
Analysis
Application
Application
Analysis
Application
Identify the principal kinds of commodities such as energy (petroleum and others),
metals (precious and basic) and agricultural.
§ Understand the drivers of commodities pricing and its differences with financial
assets pricing.
§ Analyze the relationship between inflation and commodities.
Identify the different ways to materialize commodities investments such as spot, futures,
ETF, mutual funds, stocks.
Understand the concept of convenience yield and the forward prices curve shape
(contango and backwardation)
Analyze the diversification and risk factor to include commodities in a client’s portfolio.
Understanding
Explain private equity investment main characteristics and how private equity funds
Understanding
§
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 44 of 60
Understanding
Analysis
Analysis
Analysis
Application
Kinds of investments
Private equity in a portfolio
works.
Analyze the different kinds of private equity investments such as venture capital and
buy-outs, identifying its main characteristics and differences.
Analyze the diversification and risk factor to include private equity investments in a
client’s portfolio.
11.2 Deepening / Enlargement of Funds
Topic
Hedge funds risks
Hedge funds due dilligence
Hedge funds in a portfolio
Learning Outcome (The financial planner should be able to)
Analyze the risks involved in a hedge fund investment such as: leverage, liquidity,
model, style draft, market.
§ Analyze how each investment strategy has an specific type of risk.
§ Understand the effects of non-normal distributions on hedge funds returns.
Understand the hedge funds due diligence process
Analyze the diversification and risk factor to include hedge funds investments in a
client’s portfolio.
§
11.3 Deepening / Enlargement of Portfolio Management
Topic
Learning Outcome (The financial planner should be able to)
Value at Risk
Application
Cognitive
Level
Analysis
Analysis
Understanding
Understanding
Analysis
Cognitive
Level
Analysis
Understand
Explain the Value at Risk definition and its interpretation.
Understand the different methods to calculate the VaR (hiscoric, parametric and
montecarlo simulation).
Calculate the Value at Risk at 95% and 99% confidence level.
Application
11.4 Deepening / Enlargement of Insurance
Peculiarities in tort liability
The relationship between tort liabiliy insurance and the insurance cycle
insurance
Special life insurances
Life insurance contracts built on a personal portfolio, different types of variable annuities
Advanced methods of risk
How to apply company-risk-management strategies to individuals and families
avoidance, reduction and
replacement
Private Insurance
Unterstand the fiscal benefit of a insurance solutions and their limits.
11.5 Deepening / Enlargement of Pensions and Retirement Planning
Topic
Learning Outcome (The financial planner should be able to)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Analysis
Application
Application
Application
Understand
Cognitive
Page 45 of 60
Advanced retirement planning
strategies
Peculiarities in Pension plans and
schemes
Retirement gap
Retirement pot
Retirement savings
Retirement plan
Periodic adjustments
Analyse the importance of guarantees for defined contributions plans
Level
Application
Analyse how to modify pension funds asset according to the client life-cyle
Application
Calculate the client’s retirement gap as the difference between the required yearly
income and the social security & employee’s pension benefits (among others recurrent
incomes)
Calculate the amount of money required to cover the retirement gap during the
retirement years, taking into account expected return and inflation expectations.
Application
Calculate the annual savings required to achieve the amount required as retirement
pot
§ Create a retirement plan taking into consideration other kinds of income and future
value of actual wealth.
§ Present different alternatives if the initial savings requirements are not feasible.
Application
Periodically, review the plan and make the required adjustments in order to assure the
achievement of the retirement goal.
Application
11.6 Deepening / Enlargement of Real Estate
Topic
Real Estate investment strategies /
policies
Special types of real estate
investments, e.g. closed-end funds,
REITS, timber investment, …
International real estate
investments
Facility management
Real estate brokerage
Application
Learning Outcome (The financial planner should be able to)
Analyse the current structure of the client’s Real estate portfolio and assess the
appropriateness of the portfolio structure for the client in the stage of his life-cycle and
his needs.
Knowing and understanding specific types of real estate investments. Having the ability
to explain advantages and risks of this investments to the client.
Knowing the general legal und tax principles regarding international real estate
investments, e.g. double-tax agreements, inheritance law
Knowing and understanding the different possibilites of a facility manager supporting
customers to ensure the functionality ot the built environment
Knowing and understanding how real estate brokers (agents) can help clients to buy,
sell or rent properties. Also knowing some important issues of the brokerage law (e.g.
fee-structure, acting as an “exclusive broker”, …)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 46 of 60
Application
Application
Cognitive
Level
Analysis
Understand
Understand
Understand
Understand
11.7 Deepening / Enlargement of Credit / Financing
Topic
Learning Outcome (The financial planner should be able to)
Advanced techniques in real estate
financing
Financing of entrepreneurs /
dompanies
Advanced techniques in collateral
management
Analyse the different requirements for using specific real estate financing solutions –
e.g. mortgage loan with an repayment vehicle, financing real estate project
developments
Analyse the appropriate financing solutions for entrepreneurs / companies
Knowing and understanding complex forms of collateral management, e.g. entry in the
land register, collaterals with international dimensions
11.8 Deepening / Enlargement of Tax
Topic
Taxation of financial derivatives
and hybrid instruments
Tax planning
Tax system for family businesses
Holding companies and foreign
securities holding companies
Cognitive
Level
Analysis
Analysis
Understand
Learning Outcome (The financial planner should be able to)
Cognitive
Level
Knowing and understanding the classification and the fiscal treatment applicable
(with respect to personal income tax) to investments in derivative instruments
(futures, options, swaps, etc.), whether these are regulated or whether they are
instruments employed outside the market.
§ Knowing and understanding the classification and the fiscal treatment (with respect
to personal income tax) associated with investments in the following hybrid financial
instruments (both debt hybrids and capital hybrids): atypical financial contracts,
warrants, certificates, preferential participations, subordinated debt and convertible
obligations.
Knowing and understanding the diverse techniques of tax planning (for residents and
non residents), taking into account the taxation framework, such as selecting the best
investment in terms of financial-fiscal profitability, and the tax-efficient approach to rules
on revenue inclusion and compensation.
Knowing and understanding what is meant by family business, from a fiscal standpoint,
and knowing how to optimise tax exposure in this respect.
Knowing and understanding what is meant by holding company and foreign securities
holding company, and knowing how to optimise tax exposure in this respect.
Understand
§
11.9 Deepening / Enlargement of Laws, Regulations, Ethics and National law
Topic
Learning Outcome (The financial planner should be able to)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Understand
Understand
Understand
Cognitive
Level
Page 47 of 60
Regulatory topics
Contract law
Basel Solvency Regime
Knowing the regulatory peculiarities for financial advisors / planners in advising clients
Knowing the details on contract law for financial advisors / planners
Purpose, pillars and developements of the regime
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Understand
Understand
Understand
Page 48 of 60
3.12. Estate Planning
Area of Competence 12: Estate Planning
Aim: The aim of this section is to provide the financial planner with a comprehensive background to Estate Planning
Coverage:
§ Estate Planning Principles on Law and Tax
§ General knowledge about Estate Planning
§ Types of Estate Planning Documents
§ Property and Property Interests
§ Methods of Estate Transfer
§ Gift and Succession / Inheritance Taxation
§ Estate Tax Deductions
§ Calculations of Estate Tax Liability
§ Trust and Taxation of Trusts and Estates
§ Life Insurance for Estate Planning
12.1 Estate Planning Principles on Law and Tax
Topic
Learning Outcome (The financial planner should be able to)
Estate Planning Basics
Know and understand the legal framework of
§ Marriage law
§ Gift law
§ Succession law
§ Family law
§ Inheritance taxation and estate tax (where applicable)
in the sense of what are the legal regulations and requirements and also what are therefore the
suggestions and recommendations for the client’s individual situation.
12.2 General knowledge about Estate Planning
Topic
Learning Outcome (The financial planner should be able to)
General knowledge
Know the different assets a client may possess and their impact and individual role in the estate
planning process to be considered
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 49 of 60
Cognitive
Level
Understand
Cognitive
Level
Understand
Ownership
Estate planning related
products
Estate planning
strategies
Know the different forms of ownership
Know specific products which are useful in the estate planning process
Understand
Understand
Explain the elements of the estate planning strategies used by the client and recommend possible
improvements
Application
12.3 Types of Estate Planning Documents
Topic
Learning Outcome (The financial planner should be able to)
Documents needed
Necessary
documentation
Understand the documents and determine their purpose in the estate plan.
Elaborate a documentation for the client with the
- concrete family situation of the client as “status quo”
- the regulations applicable
- the recommendations and possible improvements taking into account the individual circumstances
12.4 Property and Property Interests
Topic
Property
Other property interests
Cognitive
Level
Understand
Understand
Understand the way in which property is titled and the forms of ownership
Understand the legal forms of property interest the client may possess
12.5 Methods of Estate Transfer
Topic
Methods
Learning Outcome (The financial planner should be able to)
Learning Outcome (The financial planner should be able to)
Analyze the methods of estate transfer which could include but not limited to estate transfer at
death, transfer during lifetime, marital agreements and the legal mechanisms.
12.6 Gift and Succession / Inheritance Taxation
Topic
Learning Outcome (The financial planner should be able to)
Basic concepts
Techniques for
managing gift tax
liability
Analysis and calculation
of gift tax liability
Income taxation of
Cognitive
Level
Understand
Application
Cognitive
Level
Analysis
Understand what constitutes a taxable gift under the law
Understand exceptions such as annual exclusions, special property and gifts to charity.
Cognitive
Level
Understand
Understand
Understand whether specific transactions can be deemed taxable
Understand
Understand taxation of gifts which are given during the clients lifetime
Understand
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 50 of 60
lifetime transfers
12.7 Estate Tax Deductions
Topic
Estate tax deductions
Cognitive
Level
Understand
Understand the elements of the gross estate
12.8 Calculations of Estate Tax Liability
Topic
Potential estate tax
liability
Learning Outcome (The financial planner should be able to)
Learning Outcome (The financial planner should be able to)
Understand the nature and background of estate tax and understand the steps needed to calculate
the estate tax
12.9 Trust and Taxation of Trusts and Estates
Topic
Learning Outcome (The financial planner should be able to)
Income tax implications
of trusts
National Estate Tax
Implications of Trusts
Recommendation and
Justification of the Most
Appropriate trust
Features of Trust
Excise tax on
Retirement Plans at
decease
Understand the exception to which the client is entitled, understand the various types of trusts such
as living or inter-vivo trusts
Understand the tax status of a trust and how it functions in the overall estate plan
Cognitive
Level
Understand
Understand
Understand the best type (if any) of trust the client should employ
Understand
Understand trusts classifications
Understand the excise taxes which may effect the client's estate upon decease
Understand
Understand
12.10 Life Insurance for Estate Planning
Topic
Learning Outcome (The financial planner should be able to)
Use of Life Insurance
for estate planning
Cognitive
Level
Understand
Cognitive
Level
Understand
Understand the uses of Life Insurance for estate planning
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 51 of 60
3.13. Financial Planning Process
Area of Competence 13: Financial Planning Process
Aim: The aim of this section is to enable the financial planner to prepare a comprehensive Financial Plan.
Coverage:
§ Establishing the client - planner relationship
§ Gathering client data and determining goals and expectations
§ Special planning needs / matters
§ Financial Status Analysis / Determining the clients financial situation
§ Developing and presenting a financial solution based on the client’s needs
§ Implementing the financial plan
§ Monitoring the financial plan
13.1 Establishing the client - planner relationship
Topic
Learning Outcome (The financial planner should be able to)
Terminology
Contractual relationship
Content of the financial
planning process
Services range
Necessary information
Use of information
Ethical and legal
obligations
Explain the various terminology used in the financial planning process
Explain and present a clear and concise overview of the contractual relationship between client and
the advisor if a financial plan is agreed
Explain what is a financial planning process with regard to steps e.g. clarification of goals collection
of data, necessary know how of the advisor, planning techniques etc.
Describe to the client precisely what financial planning services are possible to be provided
Explain precisely what information is needed to prepare the financial plan and why
Demonstrate how the information gathered is being or will be used within the development of a
financial plan for the client
Apply the ethical and legal obligations of the financial planner in the relationship with clients
13.2 Gathering client data and determining goals and expectations
Topic
Learning Outcome (The financial planner should be able to)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Cognitive
Level
Understand
Understand
Understand
Understand
Understand
Application
Application
Cognitive
Level
Page 52 of 60
Knowledge and skills
Ability to apply the knowledge and skills necessary for obtaining comprehensive information from
for gathering client data clients about their financial resources and obligations
Explaining the collection § Explain the purpose of comprehensive data collection and its value in client relationship
of data
management.
§ Ability to apply the knowledge and skills necessary for explaining how the information obtained is
incorporated in the overall scheme of the client’s financial plan.
Asking right questions
Ability to apply the knowledge and appropriate skills for asking the right questions in order to
§ identify the client’s personal goals for the future
§ identify the considerations to be taken into account in drawing up the client’s financial pan
§ identify the specific details about the client and or family and or enterprise which may be needed
during the course of the financial planning process.
§ determine priorities regarding the personal, financial and particular considerations that are of
importance to the client’s financial plan
Forms of identification
Identify which forms of identification may be needed in the processing and submission of formal
request forms from financial services providers
Client’s attitudes and
§ Understanding the client’s personal goals and fundamental motivations and understanding
expectations
whether these are based on reasonable financial grounds, or on other beliefs and expectations,
or on false reasoning and misunderstanding.
§ Ability to apply the knowledge and appropriate skills for recognising the client's system of values.
§ Understanding the client’s attitudes that generate personal, financial and professional
motivations regarding present and future needs, expectations, and personal and financial
wishes.
Determining the client’s § Understanding how a client feels regarding the risks that may be encountered during his/her life.
risk profile / tolerance
§ Understanding whether the client has a reasonable comprehension of the types and number of
level
risks that may be encountered during his/her life.
§ Understanding how a client feels regarding the specific risks that may be encountered, and how
he/she would react in certain situations.
Data protection
Understand the relevant data protection and privacy rights relating to the client’s personal
information
Storage of client data
Store client data appropriately and compliantly
13.3 Development of a Financial Plan
Topic
Private Balance Sheet
§
§
Learning Outcome (The financial planner should be able to)
Application
Application
Application
Understand
Application
Understand
Understand
Understand
Application
Cognitive
Level
Application
Create a private balance sheet based on the information of the client and show the
appropriateness of sector and regional diversification
Evaluate the investments of the client with the market price
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Application
Page 53 of 60
Private Profit and Loss / §
cash flow statement
§
§
Coverage in cases of
§
personal risk (dead,
§
disability etc.)
§
Analysing investments
§
§
Analysing debts
§
§
§
§
Analysing retirement
situation
§
Analysing tax situation
(income and
inheritance)
§
§
§
Analysing the legal
situation
Recommendations for
asset allocation,
investments and
liabilities
§
Recommendations for
provisions / insurance
§
Tax and legal relevant
recommendations
§
§
§
§
§
§
§
Create a private Profit and Loss / cash flow statement based on the information of the client
Distinguish between profit and cash related items (profitability / liquidity)
Calculate the return on investment of clients investments
Calculate the cash flow in the case of personal incidents
Demonstrate weaknesses and strengths in the provisions
Create a really comprehensive analysis taking all aspects into account (e.g. spread of assets
after death according to last will)
Analyse the risk and return of any investment
The investments are potentially: cash account, term deposits, securities, real estate, closed end
funds, capital life insurance etc.
Analyse the risk and costs of debts
Calculate the appropriateness of using debts in order to increase profitability (leverage effect)
Demonstrate the effect of debts in the case of personal incidents
Analyse the income sources after retirement e.g. interest income, dividends received, rent,
social security, pension plans, deferred compensation
Demonstrate the effect of inflation for the long time retirement income situation including costs of
nursing
Show the tax burden with income tax (absolute figures, average tax rate, maximum tax rate)
Calculate the potential inheritance tax
Identify potential tax problems due to a combination of private investments and corporate
investments
Demonstrate the potential problems due to legal obligations e.g. potential liabilites
Application
Create an asset allocation based on clients needs, risk mentality, global economic situation and
global economic outlook including the time frame of the client
Recommend detailed which existing investments should be disinvested
Propose ideas for new asset allocation and investments in a specific way (amount, chances,
risks etc.)
Recommend detailed insurance products and solutions to cover risk in accordance with client
needs and risk avoiding mentality
Demonstrate chances to reduce costs for insurance premiums
Develop intelligent solutions e.g. combination of risk and disability insurance
Create recommendations in order to optimize income tax
Create recommendations in order to optimize inheritance tax
Application
13.4 Presenting and explaining the financial plan
Topic
Learning Outcome (The financial planner should be able to)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Application
Application
Application
Application
Application
Application
Application
Application
Cognitive
Page 54 of 60
Summary
Explanation
Final agreement
Prepare a summary in order to show the most important results and recommendations of the plan
Arrange a meeting with the client to explain all issues relevant for the client in a form the client
understands
Propose next steps e.g. next meeting and specific investment ideas with underlying products after
agreement on content of the plan (analysis, synthesis and recommendations)
13.5 Implementing the financial plan
Topic
Implementation
Purchase agreements
Professional limitations
Apply best practices to ensure that recommendations of the financial plan are effective in a timely
manner and that the client understands any action taken on his/her behalf by an intermediary
Prepare purchase agreements on behalf of the client which have to be executed after presenting
the financial plan and agreement on next steps
Understand professional and technical limitations and where limitations become apparent, refer to
another/other professional(s)
13.6 Monitoring the financial plan
Topic
Monitor the
performance
Changes and review
Learning Outcome (The financial planner should be able to)
§
§
§
§
Learning Outcome (The financial planner should be able to)
Design how to monitor the performance of the financial plan
Apply the best practices and techniques for monitoring the financial pan
Understand the need to review the proposed and/or implemented financial plan with the client to
ensure that it continues to meet his/her personal and financial goals, making appropriate
recommendations for changes if needed
Propose the changes needed to take account of any regulatory and/or legislative changes to
ensure that the financial plan remains up to date and compliant
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 55 of 60
Level
Application
Application
Application
Cognitive
Level
Application
Application
Understand
Cognitive
Level
Application
Understand
3.14. Financial Planning for Business Owners
Area of Competence 14: Financial Planning for Business Owners
Aim: The aim of this section is to enable the financial planner with the tools required to understand the complexity of the business owner
environment, in the sense of the relations between the company and family members. Also, it provides basic tools in order to be able to assess
the valuation of the company.
Coverage:
§ Family governance and communications
§ Family wealth management
§ Family Office (FO)
§ Family Protocol (FP)
§ Financial Statements Analysis
§ Company valuation
14.1 Family governance and communications
Topic
Learning Outcome (The financial planner should be able to)
Family business
characteristics
Family values
Cognitive
Level
Analysis
Understand the Family business characteristics and analyze the family governance.
Identify the family values which are behind the wealth generation and how current wealth have been
obtained
Family leader objectives Identify and differentiate objectives and restrictions of the family leader than the objectives and
restrictions of the family as a whole.
Communication
Ability to identify and use efficiently the different channels of communications with the family
channels
members.
Ability to identify which kind of information share with each category of family member.
Succession planning:
§ Demonstrate the client the necessity of an successful transfer of the enterprise into the next
generation
§ Check the current provisions
§ Create a set of recommendations to fulfill the goals of the client
14.2 Family wealth management
Topic
Learning Outcome (The financial planner should be able to)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 56 of 60
Analysis
Application
Application
Analysis
Cognitive
Level
Family wealth time
frame
Investments objectives
Investment strategies
Portfolio rebalancing
Identify and analyze the time frame of the family investments: distribution (one generation) or
growth (multi generation) and balance with income requirements.
Understand family objectives and restrictions and be able to translate them into financial goals
Understand and analyze different investment strategies such as: indexation, strategic asset
allocation, core-satellite approach
Be able to identify changes on the family situation (newcomers, divorces, etc) and make
recommendations on how rebalance the portfolio.
14.3 Family Office (FO)
Topic
Concept and
characteristics
Services provided
Single and Multi FO
Legal requirements
Learning Outcome (The financial planner should be able to)
Requirement
assessment
General content
Family member /
Ownership / employee
Publicity
FP as a succession tool
Understand and be able to explain the different services the family office can provide to the family
Identify advantages and disadvantages of single and multi FO structures, and be able to advise
which one fits better family needs
Understand all legal requirements to create a FO
Learning Outcome (The financial planner should be able to)
Identify and be able to explain the general content of a FP, including people covered, its
compulsory, inter-generation rules, rights and obligations as family
members/shareholders/employees, jurisdiction in case of conflict, etc.
Identify the connections between a person covered by the FP as shareholder and/or employee
and/or family member.
Be able to identify potential conflicts arising for this relationships among family members and other
people (company management, other shareholders, etc)
Explain which content of the FP should be open to other stakeholders and if whether or not it should
be notarized and registered.
Understand the role of the FP on a successful strategy of promote continuity of the company and
planning its succession
Learning Outcome (The financial planner should be able to)
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Analyze
Application
Understand
Cognitive
Level
Analysis
Be able to assess whether or not a family group requires a FP
14.5 Financial Statements Analysis
Topic
Analysis
Cognitive
Level
Understand
Understand what a FO is and its key characteristics.
14.4 Family Protocol (FP)
Topic
Analysis
Analysis
Application
Application
Analysis
Analysis
Cognitive
Page 57 of 60
Basic financial
statements
Non business related
items
Balance sheet analysis
Income Statement
14.6 Company valuation
Topic
Ongoing business
Dividend Discount
Valuation
Free Cash Flow
Valuation
Market-based valuation
Level
Understanding
Understand the structure and components of the Balance sheet and income statement
Identify assets, liabilities, income and expenses included on the company financial statements but
that are not related with the business activity and how they affect the financial statements analysis
• Identify if assets and liabilities are well balanced (current assets, noncurrent assets, current
liabilities, non current liabilities and shareholders‘ equity
• Analyze the working capital situation and requirements.
• Analyze the intangible assets and its appropriate valuation.
• Analyze the solvency of the company: from the side of payment ability and collateral
availability.
• Identify the key components of the Income statement: Revenue, cost of goods sold, gross
margin, EBITDA, depreciation, EBIT and net income.
• Analyze the financial and operative leverage of the company, and evaluate its convenience.
• Calculate and explain ROA and ROE and its implications on company profitability.
Learning Outcome (The financial planner should be able to)
Understand the concept of company valuation as an ongoing business
• Understand when is appropriate to use dividends for company valuation.
• Calculate the required rate of return of the equity based on the CAPM model.
• Calculate company valuation using the Gordon Growth model.
• Understand the growth factor and how can be calculated.
• Understand when is appropriate to use free cash flow for company valuation.
• Calculate the free cash flow of the company
• Calculate the weighted average cost of capital (WACC)
• Calculate the terminal value, based on the Gordon Growth model or on price multiples
• Identify advantages and shortfalls of this method, and the economic rationale of this
approach.
• Calculate and interpret the value of the equity (making the required adjustments) using price
multiples such as: P/E, P/B, P/S, P/CF, EBITDA.
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Page 58 of 60
Analysis
Application
Application
Cognitive
Level
Understand
Application
Application
Application
3.15. International Aspects of Financial Planning (Tax & Law)
Area of Competence 15: International Aspects of Financial Planning
Aim: The aim of this section is to enable the financial planner with a comprehensive background to International tax and law aspects of Financial
Planning.
Coverage:
§ International Private Direct Taxes
§ International Private Law
15.1 International Private Direct Taxes
Topic
Legal regulation,
compliance and ethics
Anti-money laundering
legislation
Learning Outcome (The financial planner should be able to)
Cognitive
Level
Application
Apply professionalism, trust and integrity in his proposal, in order to avoid any fraud.
Apply the ‘Ethics of financial services’ as defined for National planning.
§ Define and explain the European legislation and the National legislation (repressive and
preventive) in order to avoid any fraud by himself or his client.
§ List the International cooperation existing within Europe
§ Identify Money laundering indicators.
Double taxation / Salary § Define and describe Double taxation Treaties as
split
- Resident
- Freelancer
- Employee
- Director
§ Explain the differences between National taxation as Resident State / Host State.
§ Describe the Salary split with the neighbour countries
International Estate
Define and describe double taxation treaties on inheritance tax
planning
International Tax
§ Define and describe Double taxation: the discussion of the OECD Model Convention
planning
§ Understand European Tax Law for matters such as
- Parent-Subsidiary Directive
- Tax Package (interest and royalties directive, code of conduct, savings directive)
§ Apply International tax planning techniques by using techniques existing for instance in:
§
§
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Understand
Understand
Understand
Understand
Page 59 of 60
- The Netherlands, certification through trust, private fund joint account, a private foundation
- Luxembourg
- Anglo-Saxon countries
- Liechtenstein
15.2 International Private Law
Topic
International Private
Law
Learning Outcome (The financial planner should be able to)
Cognitive
Level
Understand
§
Define and describe the general principles
Explain matrimonial relation
Differentiate the different possibilities of establishment of the marriage and it’s consequences.
Analysis
Analyse the matrimonial regime and the influence of divorce or separation on
- types of cohabitation
- succession
- donations
- Trust
EFPA_SQC_Qualifications standards_Appendix_CCF-Learning outcomes_EFA-EFP_V2AB_18102012.doc
Application
Analysis
Page 60 of 60