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Financial Planning Body of Knowledge

The Financial Planning Body of Knowledge (FP-BoK) describes knowledge expected of CFP® professionals and FPSC Level 1® Certificants in Financial Planning.

Click Here for Summary of Updates to Financial Planning Body of Knowledge

Revision History

This page contains all revisions that have been made to the Financial Planning Body of Knowledge (FP-BoK) and the case studies since this website was launched. The version label for the FP-BoK may be found on the Home page, About page, and each of the knowledge topic pages. The version label for each case study may be found on the first page of each case study PDF. Please note that the FP-BoK and each of the case study PDFs may have unique version labels as the version label on a particular case study is only updated if revisions have been made to that case study specifically.

Case Study – Protecting the Family: Version 1.0.1, updated 20180724

Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

This case contained errors in the mathematical calculations used in the ‘Life Insurance Needs Analysis’ chart. The following revisions were made to this case study under Version 1.0.1:

Rationale

  • The case states that there is a family RESP which has $20,000 allocated to the seven year old child and $15,000 allocated to the five year old child. In the ‘Life Insurance Needs Analysis’ chart, when determining the amount of insurance required to protect each child’s education needs, $15,000 is used for child #1 and $20,000 is used for child #2.
  • The case states Pat is age 33 and Leslie is age 35. They are planning to protect their lifestyle until they retire at age 65. In the ‘Life Insurance Needs Analysis’ chart, when calculating retirement needs for Pat if Leslie dies, N=34 is used for the number of years for Leslie to reach age 65.

Revisions

  • In subscript 4, the amount of existing education funds has been changed to $20,000 for child #1. In subscript 5, the amount of existing education funds has been changed to $15,000 for child #2 to match the case facts. The Life Insurance Needs Analysis chart was revised accordingly.
  • In subscript 6, when calculating retirement needs for Pat is Leslie dies, N=30 was used since Leslie is age 35 and is 30 years away from age 65. The Life Insurance Needs Analysis chart was revised accordingly
  • The addition within each column was revised to reflect the changed amounts resulting from the corrections.
  • On page 7, the amount of insurance coverage identified for Leslie was revised to $1.45 million

 

Case Study – Breaking a Mortgage in Favour of Lower Interest Rates: Version 1.0.1, updated 20180724

Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

The following revisions were made to this case study under Version 1.0.1:

Rationale

An error was identified in the chart on page 4, Calculations for ‘Five-Year Fixed Mortgage’, where the last line of the chart was incorrectly identified as the principal remaining at the end of a five year term. In fact, the chart was showing the principal remaining at the end of two years, to provide a comparison to the previous chart, ‘Calculations for Two-Year Fixed Mortgage’.

Revision

Wording was changed in the last line of the five-year chart on page 4 to read “Principal remaining at end of two years”.

FP-BoK: Version 1.2.0, Updated 20180724

The following revisions were made to the FP-BoK under Version 1.2.0:


Knowledge Topic 2: Financial Analysis


Sub-Topic: Financial Statements for a Business
Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

Rationale

This sub-topic was previously titled “Financial Statements for an Organization”. “Organization” generally refers to both for-profit and non-profit entities. The word “Business” generally refers to for-profit entities. There exists a wide variety of financial statements for non-profit entities that can vary from standard generally accepted for-profit financial statements.

Revision

The word “organization” was replaced with the word “business” throughout this knowledge sub-topic.

 

Knowledge Topic 7: Economics


Sub-Topic: Macroeconomics
Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

Rationale

The scope of crypto-currencies is growing rapidly and digital currencies are widely available. However, understanding of the securitization, creation, regulation and taxation of these currencies is not as widespread. To adequately represent the unique knowledge associated with this form of money, a sub-topic has been added to the Body of Knowledge.

Revision

A new article, Foundations of Money, has been added with the following knowledge expectations:

  • Explain the system that secures the modern money supply
  • Identify the nature of digital currency, such as;
    • Creation of digital money
    • Securitization of digital money
    • Regulation in Canada
    • Treatment for tax purposes in Canada
    • Risks of using digital money

 

Knowledge Topic 8: Investments


Sub-Topic: Foundations of Investment; Sub-Topic: Investment Marketplace
Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

Rationale

Online investment management companies are rapidly growing and gaining prominence. It was suggested that the knowledge topics related to “Fin-tech” would be better located within the Investment Marketplace sub topic.

Revision

The following knowledge expectation has been removed from Sub-Topic: Foundations of Investments and added to Sub-Topic: Investment Marketplace:

  • Explain key trends currently affecting investment advice, such as;
    • Growth and use of robo-advisors
    • Fin-tech (financial technology) company offerings
    • Channels through which advice is available

 

Knowledge Topic 9: Taxation


Sub-Topic: Basic Income for Tax Purposes
Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

Rationale

The taxation of a Deferred Salary Arrangement (SDA) was added to the Body of Knowledge. A SDA is a common salary arrangement in some professions where sabbatical leave can be accrued. The taxation of the deferred income can have different treatment depending on whether the arrangement is designated as ‘prescribed’.

Revision

Under Income Received by Employees, the following knowledge expectation was added:

  • Identify how a salary deferral arrangement (SDA) affects the taxation of income

 

Knowledge Topic 11: Insurance


Sub-Topic: Property and Casualty Insurance
Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

Rationale

It was suggested that knowledge of identity theft insurance may not be adequately represented within the existing knowledge item of “cyber security insurance”. Cyber breach or data breach is when personal information is unintentionally exposed or disclosed. Identity theft is the application of the exposed data, using it to steal by mis-representing the personal information of another. Identity theft is commonly offered as a rider or as an inclusion to a homeowner or renter insurance policy.

Revision

Under Liability Insurance, the following knowledge expectation was added as follows:

Bolded, green text below was added. 

  • Identify types of liability insurance, such as:
    • Commercial general liability insurance
    • Professional liability insurance (errors and omissions)
    • Cyber security insurance
    • Identity theft insurance
    • Environmental insurance
    • Executor insurance
    • Director insurance

Case Study — Balancing Multiple Goals: Version 1.1.0, Updated 20171218

Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

This case study has undergone extensive changes to address errors and inconsistencies as follows:

  • The timelines in the case narrative and the related calculations were amended to be consistent.
  • Inflation calculations had been done on a simplified basis (rate of return – inflation rate). Since financial planners are expected to use the more technically correct [(interest rate – inflation rate)/(1 + inflation rate)] formula, inflation calculations were modified to use the correct formula.
  • The case narrative was modified to clarify how and when inflation adjustments were to be considered, and calculations were revised accordingly.
  • The case narrative was modified to clarify when payments were being made or received (beginning or end of period) and the calculations were revised to reflect the correct timing of payments.
  • The MERs were revised to account for the different fees of group and individual plans, before and during retirement.
  • The average tax rate was adjusted to be consistent with the client’s taxable income.
  • The planning issues were addressed in the priority order presented in the case narrative and the strategies were adjusted accordingly.
  • The rates of return and inflation rates in the case narrative were adjusted to reflect monthly compounding and calculations were revised if needed to provide consistency.

FP-BoK: Version 1.1.0, Updated 20171206

The following revisions were made to the FP-BoK under Version 1.1.0:


Knowledge Topic 11: Insurance


Sub-Topic: Health Care Insurance

Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

Rationale
The Health Insurance section was changed to correct the way private health services plans (PHSPs) are represented. S. 248(1) of the Income Tax Act defines a PHSP as a:

  • contract of insurance in respect of hospital expenses, medical expenses or any combination of such expenses, or 
  • medical care insurance plan or hospital care insurance plan or any combination of such plans except provincial and federal government health care insurance plans.

PHSPs are for reimbursement of expenses which would otherwise qualify as eligible medical expenses, including prescriptions, medical, dental, vision care and hospital expenses. PHSPs do not include employer-paid premiums for life, disability, critical illness or accidental death and dismemberment insurance nor in most cases employee assistance programs, unless the program is administered by authorized medical practitioners as defined by CRA.

Revision
Under Private Health Services Plans, the following knowledge expectation was revised as follows.

Bolded, green text below was added. Red, italicized text was removed.

  • Identify types of coverage generally provided by private health services plans, such as:
    • Extended health coverage (above government-provided benefits)
      • Prescription drug coverage
      • Ambulance service coverage
      • Increased level of hospital accommodation
      • Out-of-country medically required care coverage
      • Vision coverage
      • Auditory coverage
      • Paramedical services coverage
      • Special medical supplies (E.g. Artificial limbs, prosthetics, medical equipment)
    • Dental coverage
    • Employee Assistance Programs, where services are provided by an authorized medical practitioner, as defined by the CRA
    • Employee assistance programs (i.e. crisis intervention, counselling, health information) 
    • Short-term disability insurance
    • Long-term disability coverage
    • Life insurance
    • Accidental death and dismemberment insurance
    • Critical illness insurance

    • Sub-Topic: Foundations of Life Insurance

    Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

    Rationale
    The Foundations of Life Insurance section was clarified to reflect the opportunity to take an advance on a life insurance policy under certain circumstances, which may typically include situations of a shortened life expectancy.

    Revision
    Under Life Insurance Contracts, the following knowledge expectation was removed:

    • Identify that an accelerated benefit may be available on a life insurance policy under certain circumstances.

    A revised knowledge expectation was added:

    • Identify that an advanced benefit may be available on a life insurance policy under certain circumstances, such as a shortened life expectancy.


    Sub-Topic: Advanced Uses of Life Insurance
    Knowledge is expected of CFP®  professionals only.

    Rationale
    The Advanced Uses of Life Insurance section was revised to include an awareness of life settlements.

    Revision
    Under Advanced Uses of Life Insurance, the following knowledge expectation was added:

    • Identify that it may be possible to sell a life insurance policy to a third party, subject to jurisdictional legislation and regulation.

    Case Study—Family Decisions: Version 1.0.1, Updated 20171206

    Knowledge is expected of CFP® professionals only.

    The following revisions were made to this case study under Version 1.0.1:

    Rationale
    This case contained an error regarding the repayment of an RRSP where there is a withdrawal under the Home Buyer’s Plan. In the case, repayment would not have to start until the second year following the withdrawal (e.g., withdraw in 2017, no repayment in 2018, start repayments in 2019.) 

    Revision
    The following knowledge expectation on page 12 was removed:

    • Explain that if Tom withdraws money from his RRSP under the HBP, he must make annual repayments of at least $1,333.33 beginning in the year after the withdrawal. The standard repayment period of 15 years will be shortened by four years since Tom will need to make full repayment under the HBP by the end of the year in which he turns 71.

    A revised knowledge expectation on page 12 was added:

    • Explain that if Tom withdraws money from his RRSP under the HBP, he must make annual repayments of at least $1,333.33 beginning in the second year after the withdrawal. This will shorten his repayment period to a maximum of 10 years (from a maximum of 15 years) since Tom will need to make full repayment under the HBP by the end of the year in which he turns 71.

    Case Study—Structuring Income and Assets for a Business Owner:
    Version 1.0.1, Updated 20171206

    Knowledge is expected of CFP® professionals only.

    The following revisions were made to this case study under Version 1.0.1:

    Rationale 1
    The knowledge expectations in this case, under Tax Planning, failed to take into account that child-care deductions cannot be made where the childcare provider is related and under the age of 18. Eligible childcare costs include day-care or babysitting, boarding school and certain camp expenses. Medical expenses, education costs, clothing and transportation expenses are not eligible. You are also not allowed to deduct payments made to persons under 18 years of age who are related to you.

    Revision 1
    On page 1, Althea’s daughter’s (June) age was changed to 19:

    • Omar and Althea are parents to 12-year-old twins. Omar also has two children from a previous marriage–January, age 22, and June, age 19.

    Rationale 2
    This case referenced the Family Tax Cut, which was repealed for 2016 and later years. The case was revised to remove the Family Tax Cut.

    Revision 2
    The following knowledge expectation on page 2 was removed:

    • Family tax cut: Explain that the couple may qualify for the family tax cut, enabling up to $50,000 of Omar’s income to be taxed at Althea’s lower tax rate. This could increase the couple`s after-tax income by up to $2,000 per year. Direct Omar to the Canada Revenue Agency website for more details, including the tips on claiming the credit on their personal tax returns.

    Case Study—Tax Deductions and Income Splitting Opportunities:
    Version 1.0.1, Updated 20171206

    Knowledge is expected of both FPSC Level 1® certificants and CFP® professionals.

    The following revisions were made to this case study under Version 1.0.1:

    Rationale
    This case referenced the Family Tax Cut, which was repealed for 2016 and later years. The case was revised to remove the Family Tax Cut.

    Revision
    The following Knowledge Expectation on page 4 was removed:

    • Explain that the Family Tax Cut credit is available to the couple, enabling Diane as the higher income spouse to transfer up to $50,000 of income to Peter for tax purposes. This would save the couple up to $2,000 in taxes per year. They should investigate this opportunity with their tax specialist.