FP II — CSI Financial Planning II Quick Reference

Last revised: June 29, 2026

Compact FP II reference for Canadian Securities Institute candidates covering planning process, tax, retirement, insurance, estate, and case-analysis traps.

Exam Identity and How to Use This Page

Item	Reference
Official provider	Canadian Securities Institute
Official exam title	CSI Financial Planning II (FP II)
Official exam code	FP II
Page purpose	Independent Quick Reference for review, recall, and applied case practice
Best use	Scan before practice cases; use tables to identify issue, rule, calculation, recommendation, and trade-off

FP II-style questions often reward applied judgment more than definition recall. For each case fact, ask:

What is the planning issue?
What client objective or constraint controls the recommendation?
What tax, retirement, insurance, estate, or liquidity rule applies?
What is the best recommendation now?
What risk, limitation, or follow-up should be disclosed?

Case-Analysis Framework

Step	What to Identify	Exam Cue	High-Yield Trap
Gather facts	Family, age, residency, income, assets, liabilities, tax rate, health, dependants, goals	Incomplete fact pattern	Do not recommend product before identifying missing critical facts
Clarify goals	Retirement income, debt reduction, estate equality, tax reduction, risk transfer, education funding	Multiple competing goals	Rank urgent needs: liquidity, protection, legal documents, tax deadlines
Analyze gaps	Cash flow deficit, underinsurance, tax inefficiency, insufficient retirement capital, estate liquidity issue	“Concerned about…”	Separate emotional concern from measurable shortfall
Compare options	Registered vs non-registered, insurance vs self-insurance, will vs beneficiary designation, RRSP vs TFSA	Two plausible answers	Choose the option matching time horizon, tax rate, access needs, and control
Recommend	Specific action plus reason	“Most appropriate”	Best answer usually balances suitability, tax, liquidity, and risk
Implement	Account type, beneficiary, ownership, contribution, policy, document, professional referral	“Next step”	Legal/tax drafting usually requires referral to qualified professionals
Monitor	Life changes, tax law changes, portfolio drift, insurance needs, estate plan changes	Marriage, divorce, birth, business sale, retirement	A correct plan can become unsuitable after a major event

Core Formula Sheet

Net Worth, Cash Flow, and Savings

\[ \text{Net worth} = \text{Total assets} - \text{Total liabilities} \]\[ \text{Savings surplus} = \text{Net income} - \text{Living expenses} - \text{Debt payments} - \text{Planned spending} \]\[ \text{Debt-to-income ratio} = \frac{\text{Total debt payments}}{\text{Gross or net income used in the question}} \]

Use the income basis stated in the case. If the question gives gross income, do not silently switch to after-tax income.

Time Value of Money

\[ \text{Future value} = \text{Present value} \times (1+r)^n \]\[ \text{Present value} = \frac{\text{Future value}}{(1+r)^n} \]\[ \text{Real return} = \frac{1+\text{Nominal return}}{1+\text{Inflation rate}} - 1 \]

Approximation for quick checking:

\[ \text{Real return} \approx \text{Nominal return} - \text{Inflation rate} \]

Tax and Investment Return

\[ \text{Taxable capital gain} = \text{Capital gain} \times \text{Applicable inclusion rate} \]\[ \text{After-tax return} = \text{Pre-tax return} \times (1-\text{Marginal tax rate}) \]\[ \text{Taxable equivalent yield} = \frac{\text{Tax-free yield}}{1-\text{Marginal tax rate}} \]\[ \text{Adjusted cost base} = \text{Purchase cost} + \text{Acquisition costs} + \text{Reinvested distributions} - \text{Return of capital} \]

Insurance Needs

\[ \text{Insurance need} = \text{Capital required at death or disability} - \text{Available resources} \]

Capital required often includes debts, final expenses, tax liabilities, education funding, income replacement, special-needs support, business funding, and emergency liquidity.

Retirement Capital Need

\[ \text{Annual retirement income gap} = \text{Desired spending} - \text{Reliable income sources} \]

Reliable income sources may include government benefits, employer pensions, annuity income, and other predictable cash flow. Portfolio withdrawals should be stress-tested for market risk, inflation, longevity, and tax.

Financial Planning Process and Conduct

Area	Exam-Ready Rule	Practical Application
Client priority	Suitability depends on client facts, not product features alone	A tax-efficient strategy can still be unsuitable if it harms liquidity or risk tolerance
Scope	Confirm what planning areas are covered	If facts are missing, recommend gathering information before final advice
Conflicts	Identify, disclose, and manage conflicts	Compensation, referral arrangements, related-party transactions, and product bias may matter
Confidentiality	Client information must be protected	Sharing with spouse, lawyer, accountant, or lender generally requires client authorization
Documentation	Recommendations should be supported by facts and rationale	In case questions, state both the recommendation and the reason
Review	Plans require updates	Trigger events: marriage, separation, child, death, illness, job loss, business sale, retirement, relocation

Canadian Tax Planning Quick Reference

Deductions, Credits, and Income Character

Item	Treatment	Planning Point	Common Trap
Deduction	Reduces taxable income	More valuable at higher marginal tax rates	Do not treat deductions and credits as equivalent
Non-refundable credit	Reduces tax payable, usually only to zero	Helpful only if tax is otherwise payable	Unused amount may not generate refund unless transferable/carryforward rules apply
Refundable credit	Can create refund	Relevant for lower-income clients	Confirm eligibility from facts
Employment income	Fully taxable	Limited deductions unless specifically allowed	Employees cannot deduct broad personal expenses
Interest income	Fully taxable when earned or accrued under applicable rules	Least tax-efficient in non-registered accounts	Holding interest in taxable account may be inefficient for high-rate taxpayers
Eligible dividends	Gross-up and dividend tax credit apply	Preferential treatment versus interest	Taxable income can be higher than cash received
Non-eligible dividends	Gross-up and credit apply, but differently from eligible dividends	Common for Canadian-controlled private corporations	Do not mix with eligible dividend treatment
Capital gains	Only applicable inclusion rate is taxable	Tax deferral until disposition can be valuable	Unrealized gain is not taxable until a deemed or actual disposition
Return of capital	Reduces adjusted cost base	Tax-deferred until ACB reaches zero	Not the same as income yield
Foreign income	Generally taxable in Canada for residents	Foreign tax credit may reduce double tax	Currency conversion and withholding tax can affect result

Tax Planning Decision Table

Client Fact	Likely Planning Issue	Better Exam Response
High current tax rate, lower expected retirement tax rate	RRSP deduction value and tax deferral	Consider RRSP contribution if liquidity is adequate
Low current tax rate, future tax rate may rise	RRSP deduction may be less valuable now	Consider TFSA or delaying RRSP deduction if suitable
Near income-tested benefits	Taxable withdrawals may reduce benefits	Use TFSA/non-taxable sources where appropriate
Large unrealized gain	Tax on disposition or deemed disposition	Plan timing, use losses, consider estate consequences
Capital losses available	Offset taxable capital gains	Apply against capital gains, subject to loss rules
Spouse/common-law partner has lower income	Income splitting opportunity	Consider pension splitting, spousal RRSP, prescribed-rate loan, or reasonable salary where applicable
Minor children	Attribution risk	Avoid assuming investment income can simply be shifted to children
Owner-manager corporation	Salary/dividend/remuneration planning	Consider CPP, RRSP room, corporate tax, integration, cash flow, and benefits
Charitable intent	Donation credit and estate planning	Consider donation timing, securities with accrued gains, and will planning

Attribution and Loss Traps

Rule Area	Exam Reminder
Spousal transfer or loan	Income and capital gains may attribute back unless an exception applies, such as a properly structured prescribed-rate loan
Minor child transfer or loan	Investment income may attribute back; capital gains treatment may differ from income treatment
Spousal RRSP	Withdrawals can attribute back to contributor if made within the attribution window after contributions
Superficial loss	A capital loss may be denied if the taxpayer or an affiliated person reacquires and continues to hold the property within the relevant window
Business losses	Must be genuine and supportable; personal expenses are not automatically deductible
Tax-motivated transactions	Tax savings alone do not make a recommendation suitable

Registered and Tax-Preferred Plans

Plan	Main Use	Tax Treatment	Best Fit	Watch For
RRSP	Retirement savings	Contributions generally deductible; withdrawals taxable	Higher current tax rate, long horizon, retirement income need	Overcontribution risk, liquidity limits, future tax rate, spousal attribution
Spousal RRSP	Retirement income splitting	Contributor gets deduction; spouse/common-law partner is annuitant	Unequal retirement income between spouses	Attribution on early withdrawals
RRIF	Retirement income from RRSP assets	Withdrawals taxable; minimum annual withdrawals apply	Converting retirement assets to income	Minimum withdrawals may exceed spending need
TFSA	Flexible tax-free savings	No deduction; qualified withdrawals tax-free	Emergency fund, low tax rate, benefit-sensitive retiree, flexible goal	Contribution room tracking; non-qualified investments
RESP	Education funding	Contributions not deductible; earnings/grants taxed to student when paid as educational assistance payments	Child or grandchild education	Grant rules, beneficiary changes, unused plan consequences
RDSP	Long-term disability savings	Contributions not deductible; grants/bonds and growth taxable to beneficiary when paid	Eligible person with disability and long horizon	Disability tax credit eligibility, assistance holdback rules, benefit interaction
FHSA	First-home savings	Deductible contributions; qualifying withdrawal tax-free	Eligible first-time home buyer	Eligibility, time limits, transfer options, qualifying withdrawal rules
Non-registered account	Flexible investing	Income taxed by character; gains taxed on disposition	Extra savings, liquidity, tax-loss harvesting	Annual tax drag, ACB tracking
Pension plan	Employer retirement income	Tax-deferral during accumulation; pension income taxable	Employment-based retirement planning	Commutation risk, survivor options, indexing, pension splitting
LIRA/LIF or locked-in plan	Locked-in pension assets	Tax-deferred; withdrawals restricted by pension rules	Preserving pension funds after employment change	Unlocking limits, minimum/maximum withdrawals, jurisdiction differences

RRSP vs TFSA vs Non-Registered: Selection Matrix

Situation	Usually Favour	Why
High current income and lower expected retirement income	RRSP	Deduction valuable now; withdrawal may be taxed later at lower rate
Low current income and higher future income	TFSA	Avoid using RRSP deduction at low rate; preserve flexibility
Emergency fund needed	TFSA or liquid non-registered	Tax-free access in TFSA; avoid forced taxable RRSP withdrawal
Client receives income-tested benefits	TFSA	Withdrawals generally do not increase taxable income
Short-term goal	TFSA or non-registered cash equivalent	RRSP withdrawal can create tax cost and lost room
Maximizing education funding	RESP	Access to education-related grants and tax-deferred growth
Disability long-term support	RDSP	Designed for eligible disability planning with government assistance features
First home purchase and eligible	FHSA, then RRSP home buyer option if appropriate	Potential deductible contribution and tax-free qualifying withdrawal

Retirement Planning Reference

Retirement Income Sources

Source	Predictability	Tax Treatment	Planning Notes
CPP/QPP-type benefits	Government formula-based	Taxable	Timing affects benefit amount; coordinate with work, health, longevity, and cash flow
OAS-type benefits	Government benefit	Taxable and income-tested through recovery rules	Higher income can reduce net benefit
GIS-type benefits	Income-tested	Benefit-sensitive	Taxable withdrawals can reduce benefits; TFSA may be useful
Employer DB pension	Usually predictable	Taxable	Review survivor benefit, indexing, bridge benefit, integration, and commuted value options
Employer DC pension/group RRSP	Market-dependent	Taxable on withdrawal	Asset allocation and withdrawal rate matter
RRIF/LIF	Market-dependent with withdrawal rules	Taxable withdrawals	Sequence withdrawals with tax brackets and estate objectives
Annuity	Contractual income	Taxable portion depends on structure	Transfers longevity and market risk to insurer; reduces liquidity
Non-registered portfolio	Flexible but market-dependent	Taxed by income character	Useful for tax-efficient withdrawals and liquidity
TFSA	Flexible	Qualified withdrawals tax-free	Strong tool for late-retirement flexibility and estate liquidity

Retirement Decision Points

Decision	Choose This When	Avoid or Be Careful When
Delay retirement	Savings shortfall, good health, employability, desire for higher pension/government benefits	Burnout, health issues, job instability
Draw RRSP/RRIF earlier	Low-income years before full retirement benefits, tax smoothing, estate tax reduction	High current tax rate or benefit clawback exposure
Use TFSA withdrawals	Need cash without taxable income	Contribution room tracking is poor
Buy annuity	Longevity risk is major, client wants guaranteed income, limited investment interest	Need liquidity, inflation protection, estate control, or health/longevity concern
Keep invested portfolio	Flexibility and estate value matter	Client cannot tolerate volatility or overspending risk
Pension commutation	Need control, estate value, portability, poor fit of pension features	Client needs guaranteed income or lacks investment discipline

Investment Planning Integration

Asset Location

Asset Type	Tax Character	Often Prefer In	Reason
Interest-bearing investments	Fully taxable interest	RRSP/RRIF, TFSA, registered plan	Reduces annual tax drag
Canadian dividend equities	Dividend gross-up/credit	Non-registered or registered depending case	Preferential tax treatment may be useful outside registered accounts
Growth equities	Capital gains	Non-registered, TFSA, RRSP depending objective	Deferral and capital gains treatment can be tax-efficient
Foreign dividend equities	Foreign income and withholding tax issues	Depends on account type and treaty/product structure	Avoid assuming all registered accounts treat withholding tax the same
High-turnover funds	Frequent taxable distributions	Registered accounts	Non-registered tax drag may be high
Return-of-capital products	ACB reduction	Non-registered with tracking	Can defer tax but may create later capital gain

Suitability Factors

Factor	What It Changes
Time horizon	Ability to accept volatility and illiquidity
Risk tolerance	Portfolio risk level; not overridden by higher return target
Risk capacity	Financial ability to absorb loss; often lower near retirement or with dependants
Liquidity need	Product selection, emergency fund, insurance, and withdrawal strategy
Tax rate	RRSP value, asset location, capital gain realization, income splitting
Knowledge and experience	Complexity of recommendations
Concentration	Need for diversification, especially employer stock or business wealth
Leverage	Magnifies gains and losses; requires cash flow and risk capacity

Insurance and Risk Management

Risk Management Method

Strategy	Use When	Example
Avoid	Activity is optional and risk is unacceptable	Avoid speculative borrowing
Reduce	Risk can be lowered through behaviour or planning	Diversify portfolio, improve safety, maintain health
Retain	Loss is affordable	Small deductible, minor expense
Transfer	Loss is severe and unaffordable	Life, disability, liability, critical illness insurance

Life Insurance Selection

Product	Best Fit	Strength	Watch For
Term life	Temporary need: mortgage, dependent children, business loan	Low initial cost, simple coverage	Renewal cost, coverage expiry
Whole life	Permanent need and conservative savings component	Level premiums, cash value, estate use	Higher cost, lower flexibility
Universal life	Permanent need plus flexible investment/premium design	Flexibility and tax-sheltered accumulation within limits	Complexity, funding risk, investment assumptions
Joint first-to-die	Debt or income replacement for couple	Pays on first death	May not meet estate tax need at second death
Joint last-to-die	Estate tax, charitable legacy, wealth transfer	Often lower cost for second-death need	No payout at first death

Insurance Need by Scenario

Scenario	Key Coverage	Planning Focus
Young family with mortgage	Term life, disability insurance	Income replacement, debt repayment, childcare
Single client with no dependants	Disability, critical illness, emergency fund	Life insurance may be limited unless estate/debt need exists
Business owner	Key person, buy-sell funding, disability overhead, critical illness	Business continuity and ownership transition
High-net-worth estate	Permanent life, liquidity planning	Tax at death, equalization, charitable goals
Retiree	Long-term care, permanent life if estate need	Cash flow, health, legacy, liquidity

Disability, Critical Illness, and Long-Term Care

Coverage	Pays When	Key Features	Trap
Disability insurance	Insured cannot work under policy definition	Elimination period, benefit period, own/regular/any occupation, taxable status depends on premium payer	“Own occupation” is more protective than “any occupation”
Critical illness	Diagnosis of covered condition and survival period	Lump sum, use is flexible	It is not income replacement for all disabilities
Long-term care	Loss of independence or need for care under policy terms	Facility or home-care support	Health underwriting and benefit triggers matter
Business overhead	Disabled owner cannot work	Pays eligible business expenses	Does not replace personal income
Key person	Loss of important employee/owner	Business-owned coverage	Different from buy-sell funding

Estate Planning Quick Reference

Estate Tools

Tool	Purpose	High-Yield Exam Point
Will	Directs estate distribution and executor authority	Dying without a valid will leaves distribution to provincial/territorial intestacy rules
Power of attorney for property	Authorizes financial decisions during incapacity	Ends at death; does not replace a will
Personal/health directive	Authorizes personal or medical decisions	Names substitute decision-maker; rules vary by jurisdiction
Beneficiary designation	Direct transfer for eligible plans/policies	Can bypass estate administration but does not eliminate tax liability
Trust	Control, timing, protection, tax or disability planning	Match trust type to objective; drafting requires legal advice
Joint ownership	Survivorship or shared ownership	Can create tax, creditor, family law, and resulting trust issues
Letter of wishes	Non-binding guidance	Helpful but does not override legal documents

Tax at Death

Asset	General Treatment	Planning Point
Non-registered capital property	Deemed disposition at fair market value unless rollover applies	May trigger capital gains tax
Principal residence	Potential principal residence exemption	Only eligible years/properties can be designated
RRSP/RRIF	Value generally taxable to deceased unless eligible rollover applies	Liquidity needed if beneficiary receives asset but estate pays tax
TFSA	Tax-free status depends on successor holder/beneficiary structure	Proper designation can preserve tax advantages
Life insurance	Death benefit generally received tax-free	Useful for tax liquidity and estate equalization
Private corporation shares	Deemed disposition and possible double-tax issues	Requires coordinated tax and estate planning

Estate Planning Traps

Fact Pattern	Trap	Better Response
“Everything goes to my spouse, so no tax issue”	Rollover may defer tax, not eliminate it	Consider second-death tax and liquidity
Named beneficiary on RRSP but estate pays tax	Beneficiary may receive proceeds while estate bears tax	Coordinate beneficiary designations with will and liquidity
Cottage left equally to children	Some may want cash, others want use	Plan tax, ownership, funding, and dispute resolution
Joint account with adult child	May not prove true gift	Consider resulting trust, tax reporting, creditor and family law exposure
No incapacity documents	Family may need court appointment	Recommend appropriate powers of attorney/directives
Business owner dies	Shares, tax, control, and liquidity collide	Use shareholder agreement, insurance funding, and estate freeze planning where suitable

Family, Education, and Disability Planning

Objective	Tool	Planning Notes
Child education	RESP	Contributions, grant eligibility, beneficiary flexibility, and unused funds matter
Support child with disability	RDSP, discretionary trust, insurance, will planning	Coordinate tax, benefits, trustee choice, and long-term care
Help adult child buy home	Gift, loan, co-sign, FHSA support	Assess affordability, tax, family law, creditor risk, and fairness among children
Equalize estate among children	Insurance, will clauses, trusts, asset allocation	Equal value is not always equal treatment if assets differ in tax cost or liquidity
Second marriage/blended family	Marriage contract, trusts, beneficiary review, will update	Balance spouse protection and children’s inheritance
Separation/divorce	Update beneficiaries, powers of attorney, will, insurance, support planning	Legal advice is usually required

Business Owner Planning

Issue	Planning Tool	Exam Focus
Salary vs dividends	Remuneration planning	CPP, RRSP room, corporate/personal tax integration, cash flow
Retained earnings	Corporate investment strategy	Passive income tax issues, creditor exposure, investment policy
Key employee risk	Key person insurance	Business continuity, lender confidence, replacement cost
Shareholder death	Buy-sell agreement and insurance	Valuation, funding, control, tax consequences
Capital gains on business sale	Lifetime capital gains exemption may be relevant if conditions met	Do not assume eligibility without facts
Succession to children	Estate freeze, family trust, gradual sale	Control, tax, fairness, governance
Creditor risk	Separate assets, insurance, legal structures	Avoid relying on tax planning alone for asset protection

Product and Strategy Selection: Common “Most Appropriate” Cues

Cue in Question	Usually Points Toward	Why
Needs immediate liquidity and safety	Emergency fund, cashable GIC, high-interest savings, TFSA if room	Avoid market risk and withdrawal penalties
Wants tax deduction and retirement savings	RRSP	Deduction plus tax deferral
Wants flexibility and tax-free access	TFSA	No taxable withdrawal for qualified withdrawals
Wants permanent estate liquidity	Permanent life insurance	Death benefit can fund tax or equalization need
Temporary debt protection	Term life	Matches temporary liability at lower cost
Cannot tolerate investment loss	Guaranteed products, lower-risk allocation, annuity for income floor	Suitability overrides return target
Worried about outliving money	Annuity, delayed benefits, conservative withdrawal rate	Longevity risk management
Has large taxable estate	Estate freeze, insurance, charitable giving, trust planning	Liquidity and tax deferral/reduction
Wants to split income with spouse	Pension splitting, spousal RRSP, prescribed-rate loan	Must follow attribution and eligibility rules
Has concentrated employer shares	Diversification plan	Employment income and investment wealth are already linked

High-Yield FP II Traps

Trap	Why It Is Wrong	Exam-Safe Alternative
Recommending RRSP solely for tax refund	Refund is not the objective; after-tax wealth and future tax matter	Compare current vs future tax rate, liquidity, and goals
Ignoring insurance before investment planning	A death/disability event can destroy the plan	Address catastrophic risks first
Treating all retirement income equally	Tax and benefit effects differ	Sequence withdrawals by tax, benefit, and estate impact
Assuming beneficiary designations solve estate planning	Tax, liquidity, equalization, and incapacity issues remain	Coordinate will, designations, tax funding, and POAs
Selling investments without ACB review	Taxable gains/losses depend on ACB	Calculate ACB and tax result first
Ignoring inflation in retirement	Nominal income may lose purchasing power	Use real return or inflation-adjusted projections
Overusing permanent insurance	Higher premiums may impair cash flow	Match permanent insurance to permanent need
Failing to recommend professional referral	Legal documents and complex tax planning require specialists	Recommend lawyer/accountant/insurance specialist as appropriate
Assuming joint ownership is harmless	Can create tax and legal disputes	Clarify beneficial ownership and document intent
Choosing highest expected return	Suitability includes risk capacity and time horizon	Recommend risk-appropriate portfolio

Quick Case Answer Template

Use this structure for constructed or scenario-heavy practice:

Sentence	Purpose	Example Pattern
Identify issue	Shows you recognized the planning need	“The primary issue is retirement income sustainability after tax.”
Tie to fact	Anchors answer in the case	“The client has low liquidity and depends on income-tested benefits.”
State rule	Applies technical knowledge	“RRSP/RRIF withdrawals are taxable, while TFSA withdrawals are generally not taxable.”
Recommend	Gives the answer	“Use TFSA funds first for the short-term cash need.”
Explain trade-off	Shows judgment	“This preserves benefit eligibility but reduces future tax-free savings room until recontribution is allowed.”
Add follow-up	Covers implementation	“Confirm contribution room and review the withdrawal plan annually.”

Final Review Checklist

Before the real CSI Financial Planning II (FP II) exam, confirm you can quickly answer:

Which fact controls the recommendation: tax rate, liquidity, time horizon, risk capacity, or estate objective?
Is the question asking for tax minimization, suitability, cash flow, risk reduction, or legal implementation?
Does the strategy create taxable income, taxable capital gains, attribution, or benefit clawback exposure?
Is a registered plan, non-registered account, insurance policy, trust, will, or pension option the best match?
Are there missing facts that should be gathered before final advice?
Does the recommendation require referral to a lawyer, accountant, insurance specialist, or estate professional?
Can you explain one disadvantage of the recommended strategy?

Next step: complete timed FP II case questions and use this Quick Reference to review every missed item by issue, rule, calculation, and recommendation.

Scenario Guide

Financial Planning Practice