Quick Reference scope
This independent Quick Reference supports candidates preparing for the FP Canada CFP Companion Prep for the CFP® exam. Use it as a compact review of integrated financial planning decisions, formulas, terminology traps, and case-analysis priorities. It is not an FP Canada publication and does not replace the official competency profile, standards, or current tax tables.
CFP® case-analysis mindset
The CFP® exam is less about isolated facts and more about choosing a professional, client-centred planning response when facts conflict. Strong answers usually combine: client objectives, constraints, risk, tax, family law, ethics, cash flow, implementation, and monitoring.
| Case cue | High-yield response | Common trap |
|---|
| Client asks for a product immediately | Clarify scope, collect facts, assess suitability, disclose conflicts, document recommendation | Jumping to implementation before knowing goals, risk, tax, and liquidity |
| Incomplete or unreliable data | Request missing information, state assumptions, limit advice if scope is narrow | Giving a precise recommendation with insufficient facts |
| Urgent debt, no emergency fund, poor insurance | Prioritize cash flow, liquidity, risk protection, and high-interest debt before long-term investing | Recommending RRSP/TFSA/investments while basic risks are uncovered |
| Client wants high return with low risk | Reconcile risk tolerance, risk capacity, time horizon, and required return | Treating stated tolerance as the only risk measure |
| Spouses have unequal income | Consider tax-efficient asset location, spousal RRSP, pension income splitting where available, attribution rules | Assuming all transfers between spouses split income freely |
| Business owner has personal and corporate assets | Coordinate salary/dividend, retained earnings, creditor risk, insurance, succession, and estate liquidity | Looking only at personal tax or only at corporate tax |
| Elderly or vulnerable client | Assess capacity, undue influence, POA/mandate, liquidity, fraud risk, estate documents | Taking instructions from a family member without confirming client authority |
| Investment loss or complaint | Review suitability, documentation, disclosures, risk profile, and communication | Defending the recommendation without checking process quality |
| Divorce/separation | Update cash flow, beneficiaries, ownership, support, pension division, tax, estate documents | Ignoring beneficiary designations and joint ownership |
| Terminal illness or shortened life expectancy | Prioritize liquidity, insurance claims, estate documents, tax at death, survivor income | Focusing only on portfolio return |
Financial planning process reference
| Step | Candidate focus | Evidence of a strong exam answer |
|---|
| Establish engagement | Scope, responsibilities, compensation, conflicts, limits of advice | “Clarify the engagement before advising; disclose conflicts and obtain agreement.” |
| Collect information | Quantitative and qualitative data | “Collect tax returns, statements, insurance policies, wills, pension details, goals, constraints.” |
| Identify issues | Gaps, risks, opportunities, conflicts between goals | “Client cannot meet retirement goal unless savings, retirement age, spending, or risk changes.” |
| Analyze options | Compare alternatives using assumptions and trade-offs | “RRSP may be better if current marginal tax rate exceeds expected retirement rate; TFSA if flexibility is needed.” |
| Develop recommendations | Suitable, prioritized, client-specific | “First repay high-interest debt and secure disability coverage, then increase registered savings.” |
| Present recommendations | Explain rationale, risks, costs, tax, assumptions | “Discuss advantages, disadvantages, implementation steps, and consequences of inaction.” |
| Implement | Coordinate professionals and products | “Refer to lawyer/accountant where needed; document instructions and authority.” |
| Monitor | Review changes in goals, law, markets, family, health, employment | “Set review triggers: birth, death, job loss, sale of business, retirement, separation.” |
Professional responsibility triage
| Issue | Correct planning behaviour | Exam trap |
|---|
| Client interest | Put the client’s interests ahead of the planner’s or firm’s interests | Selecting a higher-compensation product without suitability rationale |
| Duty of care | Use prudent, competent, and diligent planning | Giving advice outside expertise without referral |
| Conflict of interest | Identify, disclose, manage, and document conflicts | Assuming disclosure alone makes unsuitable advice acceptable |
| Confidentiality | Protect client information unless authorized or legally required to disclose | Sharing details with spouse, adult child, accountant, or lawyer without authority |
| Competence | Accept work only when qualified, or involve qualified professionals | Drafting legal documents, tax opinions, or insurance underwriting conclusions beyond scope |
| Objectivity | Base advice on facts and client circumstances | Letting client emotions, sales targets, or family pressure drive recommendation |
| Fairness | Explain costs, risks, alternatives, and limitations clearly | Hiding surrender charges, tax consequences, or downside risk |
| Diligence | Act promptly and follow through | Letting insurance lapse, missing rollover deadlines, or delaying urgent estate liquidity planning |
| Documentation | Record facts, assumptions, advice, disclosures, and client decisions | Relying on verbal conversations in a suitability dispute |
| Scope limitation | Make limits explicit and avoid implying comprehensive advice | Providing “investment-only” advice while ignoring known insurance or debt issues |
Client data checklist
| Planning area | Key information to collect |
|---|
| Personal and family | Age, marital status, dependants, residency, health, family obligations, support obligations |
| Goals | Retirement date, lifestyle, education funding, home purchase, business exit, estate intentions, philanthropy |
| Cash flow | Income sources, expenses, savings rate, debt payments, irregular expenses, emergency fund |
| Net worth | Assets, liabilities, ownership, adjusted cost base, unrealized gains/losses, liquidity |
| Tax | Returns, marginal rate, deductions, credits, losses, carryforwards, instalments, residency, business income |
| Employment | Salary, bonus, pension, group benefits, stock options, severance terms, disability coverage |
| Business | Ownership structure, shareholder agreement, retained earnings, key-person risk, succession plans |
| Investments | Account types, asset mix, risk profile, fees, time horizon, concentration, tax slips |
| Insurance | Life, disability, critical illness, health, long-term care, liability, beneficiaries, policy ownership |
| Retirement | CPP/QPP, OAS, employer pension, RRSP/RRIF, locked-in plans, TFSA, annuity income |
| Estate | Will, powers of attorney/mandates, executor, beneficiaries, trusts, joint ownership, tax liquidity |
| Constraints | Ethical, religious, ESG, liquidity, legal, family, tax, creditor, and behavioural constraints |
Use exam-provided assumptions, current tax tables, and any supplied product limits. Match rate period to payment period.
Time value of money
\[
FV = PV(1+r)^n
\]\[
PV = \frac{FV}{(1+r)^n}
\]\[
PV_{\text{annuity}} = PMT \times \frac{1-(1+r)^{-n}}{r}
\]\[
FV_{\text{annuity}} = PMT \times \frac{(1+r)^n-1}{r}
\]\[
PMT = P \times \frac{r}{1-(1+r)^{-n}}
\]
| Formula use | Exam reminder |
|---|
| Future value | Use for savings goals, education funding, inflated retirement spending |
| Present value | Use for required lump sum, insurance capital needs, pension comparison |
| Ordinary annuity | Payments at period end |
| Annuity due | Payments at period beginning; ordinary annuity result multiplied by 1 + r |
| Loan payment | Mortgage, debt consolidation, investment loan cash-flow analysis |
| Real return | Adjust nominal return for inflation, not by simple subtraction when precision matters |
\[
1+r_{\text{real}}=\frac{1+r_{\text{nominal}}}{1+i}
\]
Personal finance ratios
| Ratio | Plain formula | Use |
|---|
| Net worth | Assets - liabilities | Solvency and progress tracking |
| Savings ratio | Annual savings / gross income | Retirement and goal funding discipline |
| Liquidity ratio | Liquid assets / monthly essential expenses | Emergency fund adequacy |
| Debt-to-asset ratio | Total liabilities / total assets | Leverage and solvency risk |
| Debt service ratio | Required debt payments / income | Cash-flow pressure |
| Emergency fund months | Emergency assets / monthly essential expenses | Job-loss or interruption resilience |
| Portfolio return | Sum of weight × return | Asset allocation calculations |
| After-tax return | Pre-tax return × 1 - tax rate | Compare taxable investments |
| Capital gain | Proceeds - ACB - disposition costs | Non-registered taxable gains |
| ACB per unit | Total ACB / total units | Mutual fund/ETF disposition tracking |
Tax calculation logic
| Concept | Planning meaning |
|---|
| Income inclusion | Amount added to income before deductions |
| Deduction | Reduces taxable income; value generally depends on marginal tax rate |
| Non-refundable credit | Reduces tax payable, usually not below zero |
| Refundable credit | May generate refund even if tax payable is zero |
| Marginal tax rate | Tax rate on next dollar of income |
| Average tax rate | Total tax divided by total income |
| Taxable capital gain | Capital gain × current inclusion rate |
| Dividend gross-up/credit | Use current exam tax table; eligible and non-eligible dividends differ |
| Loss carryovers | Apply only where rules allow; watch capital vs non-capital loss treatment |
| Attribution rules | Income may be taxed back to transferor when property is shifted to related persons |
\[
\text{After-tax deductible contribution cost} = C \times (1-t)
\]\[
\text{After-tax withdrawal} = W \times (1-t)
\]
Investment risk and return
| Measure | Plain formula or interpretation | Exam use |
|---|
| Expected return | Sum of probability × return | Scenario-weighted return |
| Weighted portfolio return | Sum of asset weight × asset return | Asset allocation |
| Standard deviation | Volatility of returns | Total risk, not just downside |
| Beta | Sensitivity to market movement | Systematic equity risk |
| Alpha | Return above benchmark-adjusted expectation | Manager performance, not guaranteed skill |
| Sharpe ratio | Excess return / standard deviation | Risk-adjusted return comparison |
| Duration | Bond price sensitivity to rate changes | Interest-rate risk |
| Modified duration estimate | Price change ≈ -duration × yield change | Bond price impact |
| Correlation | Degree assets move together | Diversification benefit |
| Sequence risk | Poor returns early in withdrawals | Retirement income planning |
\[
\%\Delta P_{\text{bond}} \approx -D_{\text{modified}} \times \Delta y
\]
Insurance needs
| Need | Plain formula |
|---|
| Life insurance capital need | PV of survivor income needs + debts + education + final expenses + emergency reserve - existing resources |
| Disability income gap | Required income - existing disability benefits - sustainable other income |
| Critical illness need | Treatment/recovery costs + debt reduction + income interruption + caregiver costs - available resources |
| Business key-person need | Revenue disruption + replacement cost + debt/credit impact + transition costs |
| Buy-sell funding need | Agreed business value or formula value × ownership interest |
Canadian tax planning distinctions
| Item | Planning treatment | High-yield trap |
|---|
| Employment income | Generally fully taxable; limited deductions | Overstating deductions available to employees |
| Self-employment income | Business income less reasonable expenses; CPP/QPP and instalment issues may arise | Ignoring cash-flow needs for tax remittances |
| Interest income | Generally fully taxable annually | Holding high-interest taxable investments in non-registered account without considering alternatives |
| Canadian dividends | Gross-up and dividend tax credit apply; eligible/non-eligible differ | Comparing dividend yield to interest yield on a pre-tax basis only |
| Foreign dividends | Generally taxed differently from Canadian eligible dividends; withholding tax may apply | Assuming dividend tax credit applies |
| Capital gains | Taxed on included portion when realized or deemed realized | Ignoring ACB, selling costs, superficial loss, or deemed disposition |
| Return of capital | Reduces ACB; may defer tax | Treating all cash distributions as income |
| RRSP deduction | Deduction may reduce current tax; withdrawal taxable | Contributing when liquidity is poor or future tax rate may be higher |
| TFSA income | Contributions not deductible; qualifying income and withdrawals tax-free | Using TFSA room for short-term speculation without risk awareness |
| Spousal planning | Can smooth retirement income if structured correctly | Ignoring attribution and withdrawal timing rules |
| Charitable giving | Credits and donation timing can matter | Forgetting unrealized-gain planning or estate liquidity |
| Principal residence | May shelter some or all gain if designation rules are met | Assuming every property is fully exempt |
| Business/corporate income | Integration, salary/dividend mix, passive income, CDA, and succession matter | Looking only at lowest immediate tax, not total family outcome |
Registered and tax-preferred account selection
| Account or plan | Contribution treatment | Withdrawal treatment | Best fit | Common trap |
|---|
| RRSP | Deductible within available room | Taxable when withdrawn | Higher current tax rate, retirement savings, income smoothing | Treating refund as “free money” instead of part of retirement strategy |
| Spousal RRSP | Contributor claims deduction; spouse/partner owns plan | Taxable to annuitant, subject to attribution rules | Retirement income splitting, unequal income spouses | Ignoring attribution timing |
| TFSA | Not deductible | Qualifying withdrawals tax-free and room may be restored | Flexibility, emergency savings, lower current tax rate, uncertain future tax | Holding cash forever when long-term growth room is valuable |
| RRIF | Converted retirement income vehicle | Minimum withdrawals taxable | Retirement drawdown | Forgetting taxable withdrawals and sequencing with other income |
| Locked-in plan/LIF | Pension-origin funds with restrictions | Withdrawals subject to prescribed limits | Preserved pension assets | Assuming locked-in money is as flexible as RRSP money |
| RESP | Contributions not deductible; grants may apply | Educational assistance payments taxable to student | Education funding for beneficiary | Ignoring grant rules, beneficiary changes, and non-education outcomes |
| RDSP | Contributions not deductible; grants/bonds may apply | Withdrawals have mixed tax treatment | Long-term planning for eligible disabled beneficiary | Missing disability eligibility and assistance repayment rules |
| FHSA | Deductible contributions; qualifying withdrawals tax-free | Taxable if not qualifying, subject to transfer options | Eligible first-home purchase planning | Treating it as universally available or ignoring timing |
| DPSP/RPP | Employer-sponsored | Retirement income taxable | Workplace retirement savings | Ignoring pension adjustment impact on RRSP room |
| Non-registered account | No deduction | Tax depends on income type and realization | Flexibility, excess savings, capital gains planning | Poor ACB tracking and tax-inefficient asset location |
RRSP vs TFSA decision rule
| Situation | Usually favours | Why |
|---|
| Current marginal tax rate higher than expected withdrawal rate | RRSP | Deduction at high rate, withdrawal at lower rate |
| Future tax rate expected higher than current rate | TFSA | Avoids higher future withdrawal tax |
| Need flexible access before retirement | TFSA | Withdrawals do not create taxable income |
| Employer matching available in group plan | Employer plan first | Matching is part of compensation |
| Client may receive income-tested benefits | Often TFSA | TFSA withdrawals usually do not increase taxable income |
| Client lacks emergency fund | TFSA or cash reserve first | RRSP withdrawals may create tax and lost room |
| Behavioural risk of spending refunds | TFSA or automatic reinvestment of refund | RRSP advantage weakens if refund is consumed |
Key equivalence principle: if the contribution tax rate and withdrawal tax rate are the same, RRSP and TFSA outcomes can be economically similar when comparing equivalent pre-tax dollars. Differences arise from tax-rate changes, benefit clawbacks/recovery taxes, liquidity, contribution room, and behaviour.
Investment suitability matrix
| Investment | Main use | Major risks | Tax notes | Suitability cautions |
|---|
| Cash/high-interest savings | Liquidity, emergency fund | Inflation, reinvestment | Interest taxable if non-registered | Not suitable for long-term growth alone |
| GIC/term deposit | Capital certainty, short horizon | Inflation, liquidity, issuer coverage limits | Interest taxable annually/accrued | Early redemption restrictions |
| Bonds | Income, diversification, liability matching | Interest rate, credit, inflation | Interest taxable; gains/losses possible | Longer duration increases rate sensitivity |
| Bond funds/ETFs | Diversified fixed income | NAV fluctuation, duration, credit | Distributions and gains vary | Not the same as holding a bond to maturity |
| Common shares | Growth, dividends | Market, business, concentration | Dividends/gains taxed differently | Volatility unsuitable for short-term required cash |
| Preferred shares | Income, tax-efficient dividends | Rate, credit, liquidity, call risk | Canadian dividends may get credit | Not risk-free fixed income |
| Mutual funds | Diversification, professional management | Fees, manager risk, tax distributions | Tax slips may include various income types | Embedded gains and MER matter |
| ETFs | Low-cost diversification, transparency | Market, tracking, liquidity | Similar tax issues to held assets | Trading spreads and behaviour risk |
| Segregated funds | Insurance contract features, beneficiary designation, guarantees | Higher fees, insurer risk, market risk | Tax treatment differs from mutual funds | Guarantees have conditions and cost |
| Annuities | Longevity-risk transfer, stable income | Inflation, liquidity, insurer risk | Tax depends on registration and structure | Irreversible or low-liquidity decision |
| Alternatives/private products | Diversification or specialized exposure | Valuation, liquidity, leverage, complexity | Product-specific | Unsuitable if client cannot understand or tolerate illiquidity |
| Leveraged investing | Magnify potential return, tax strategy | Magnified losses, cash-flow, rate risk | Interest deductibility depends on purpose and rules | Unsuitable without strong risk capacity and stable cash flow |
Asset location quick guide
| Asset type | Taxable account | RRSP/RRIF | TFSA | Planning note |
|---|
| Interest-bearing assets | Least tax-efficient if high marginal rate | Tax deferred until withdrawal | Tax-free growth | Often better sheltered if room available |
| Canadian dividend equities | Dividend tax credit may help | Dividends become ordinary taxable withdrawals later | Tax-free growth | Account choice depends on rate, horizon, room |
| Capital-gain-oriented equities | Deferral and partial inclusion can help | Tax deferred, but withdrawals fully taxable | Tax-free growth | TFSA valuable for high expected growth |
| Foreign equities | Foreign withholding and tax reporting may apply | Treatment varies by account and treaty | Treatment varies; withholding may be unrecoverable | Do not assume all accounts treat foreign tax the same |
| High-turnover funds | Annual taxable distributions | Tax deferred | Tax-free | Review after-tax return, not only pre-tax return |
| Corporate-owned investments | Affects corporate tax, passive income, CDA/RDTOH concepts | Not applicable | Not applicable | Coordinate with accountant; integration matters |
Insurance and risk management
| Product or strategy | Core purpose | Best fit | Traps |
|---|
| Term life | Temporary death-benefit need | Mortgage, young family, income replacement, buy-sell term need | Ignoring renewal cost and conversion options |
| Whole life | Permanent death benefit with cash value | Estate liquidity, permanent dependency, conservative legacy planning | Selling as an investment without comparing cost and flexibility |
| Universal life | Flexible permanent coverage and investment component | Complex estate/business planning with ongoing funding ability | Underfunding, lapse risk, unrealistic illustrations |
| Disability insurance | Replace income if unable to work | Earned-income dependency, self-employed, professionals | Not checking definition of disability, waiting period, benefit period, taxability |
| Critical illness | Lump sum on covered diagnosis | Recovery costs, debt reduction, caregiver flexibility | Confusing with disability insurance |
| Long-term care | Care-cost risk | Aging clients with assets to protect and limited family care | Ignoring inflation and care availability |
| Health/dental | Medical expense risk | Self-employed, retirees, gaps in group coverage | Duplicate coverage or exclusions |
| Creditor insurance | Debt-linked coverage | Convenience for some borrowers | Usually less flexible than personally owned coverage |
| Personal liability/umbrella | Lawsuit risk | Homeowners, drivers, professionals, higher net worth | Focusing only on life/investment risk |
| Business overhead expense | Covers business expenses during disability | Self-employed/business owners | Confusing personal income need with business expense need |
| Key-person insurance | Protects business from loss of key person | Owner-manager or critical employee | Incorrect owner/beneficiary structure |
| Buy-sell insurance | Funds shareholder/partnership buyout | Business succession | No agreement, outdated valuation, wrong ownership |
| Corporate-owned life insurance | Estate/succession/tax planning | Incorporated clients with permanent needs | Ignoring policy ACB, CDA concepts, shareholder benefit risk, creditor risk |
Retirement planning reference
| Retirement source | Planning role | Candidate reminders |
|---|
| CPP/QPP | Earnings-related public pension | Start timing depends on health, cash flow, tax, longevity, survivor issues |
| OAS/GIS | Residency/income-tested public benefits | Watch taxable income, recovery taxes, and low-income benefit interactions |
| Employer DB pension | Lifetime income, often survivor options | Compare survivor benefit, indexing, bridge benefits, commuted value risk |
| Employer DC pension/group RRSP | Accumulation account | Investment risk and longevity risk remain with member |
| RRSP/RRIF | Tax-deferred personal retirement savings | Withdrawal sequencing affects tax and benefits |
| Locked-in accounts/LIFs | Pension-origin retirement assets | Restricted access; withdrawal limits and provincial/federal rules matter |
| TFSA | Tax-free flexible savings | Useful for retirement flexibility and income-tested benefit management |
| Non-registered assets | Flexible capital | Manage ACB, gains realization, income type, and asset location |
| Annuity | Transfers longevity and market risk | Liquidity and inflation protection trade-offs |
| Home equity | Potential fallback or planned resource | Downsizing, borrowing, reverse mortgage, transaction costs, emotional constraints |
Retirement drawdown decision points
| Question | Planning implication |
|---|
| Is guaranteed income enough for essential expenses? | If not, consider annuity, lower spending, later retirement, or more conservative withdrawal plan |
| Is the client in a low-income period before pensions start? | May consider strategic RRSP/RRIF withdrawals or capital gains realization |
| Will withdrawals trigger benefit recovery or higher brackets? | Sequence TFSA, non-registered, RRSP/RRIF carefully |
| Is there a younger spouse? | Pension survivor choices, RRIF minimum planning, estate deferral options |
| Is longevity risk high? | Avoid overly aggressive early withdrawals; consider guaranteed income |
| Is health poor or life expectancy shortened? | Liquidity, estate goals, survivor income, and tax at death may dominate |
| Are assets concentrated or illiquid? | Reduce sequence risk and ensure cash reserve for withdrawals |
Estate, incapacity, and succession planning
| Tool or issue | Planning purpose | Exam reminders |
|---|
| Will | Directs estate distribution and executor authority | Update after marriage, separation, birth, death, business sale, move, or major asset change |
| Power of attorney/mandate | Incapacity decision-making | Confirm authority, scope, and jurisdiction; avoid family-member instructions without client authority |
| Personal/health directive | Medical and personal-care decisions | Coordinate with family communication and provincial rules |
| Beneficiary designation | Transfers certain registered/insurance assets outside estate process where available | Must align with will, tax liability, and family obligations |
| Joint ownership | Survivorship or convenience | Watch beneficial ownership, tax, creditor, family-law, and estate-dispute risk |
| Trust | Control, protection, tax, disability, minor beneficiary, blended family planning | Costs, tax filings, trustee duties, and attribution matter |
| Deemed disposition at death | Tax recognition on many capital assets | Plan liquidity; spouse/partner rollovers and principal residence rules may reduce immediate tax |
| RRSP/RRIF at death | Often taxable unless qualifying rollover applies | Estate may owe tax even if beneficiary receives proceeds |
| Principal residence | Potential capital-gains shelter | Designation choice matters when multiple properties exist |
| Charitable bequest | Philanthropy and tax-credit planning | Coordinate will, beneficiary designations, and estate liquidity |
| Business succession | Continuity, buyout, tax, family fairness | Shareholder agreement, valuation, insurance, and voting control are central |
| Blended family | Protect spouse and children from prior relationship | Consider trusts, beneficiary designations, matrimonial home issues, and clear documentation |
Family, debt, and cash-flow planning
| Issue | Planning response | Trap |
|---|
| High-interest consumer debt | Prioritize repayment before taxable investing | Comparing investment return before tax and risk to debt cost |
| Mortgage prepayment vs investing | Compare after-tax expected return, risk, liquidity, and client comfort | Assuming leverage is suitable because expected return is higher |
| Emergency fund | Hold liquid, low-risk assets for essential expenses | Investing emergency cash in volatile assets |
| Education funding | RESP first where grants and timing fit | Ignoring beneficiary age, education uncertainty, and contribution flexibility |
| Dependant with disability | RDSP, trusts, insurance, government benefits, estate planning | Leaving assets directly in a way that may disrupt benefits |
| Aging parents | Cash flow, caregiving, tax credits, housing, POA, estate coordination | Making gifts or guarantees without client’s own retirement security |
| Separation/divorce | Update budget, support, pensions, beneficiaries, estate documents | Keeping ex-spouse beneficiary by oversight |
| Adult child assistance | Loan vs gift, documentation, fairness, tax and family-law implications | Damaging retirement plan to fund child’s lifestyle |
| Major purchase | Opportunity cost, financing, tax, insurance, liquidity | Using registered withdrawals without assessing tax and room impact |
Business-owner planning
| Topic | Candidate focus |
|---|
| Salary vs dividends | Compare CPP/QPP participation, RRSP room, corporate/personal integration, cash flow, benefits |
| Retained earnings | Consider business reinvestment, passive investment tax, creditor exposure, and shareholder needs |
| Shareholder agreement | Buy-sell terms, valuation, disability/death provisions, dispute resolution |
| Key-person risk | Insurance, succession, documentation, client concentration, management depth |
| Estate freeze | Succession, tax deferral, family participation, valuation, control |
| Capital gains planning | ACB, exemptions if available, crystallization, AMT/alternative tax issues where applicable |
| Corporate-owned insurance | Funding buyout, estate liquidity, CDA concepts, creditor and shareholder benefit analysis |
| Business sale | After-tax proceeds, retirement income, non-compete/earnout risk, debt repayment, reinvestment plan |
| Family business | Fairness vs equality, active/inactive children, voting control, tax, governance |
High-yield suitability decision table
| Scenario | Likely planning priority | Better answer includes |
|---|
| Young family, mortgage, one income, children | Emergency fund, disability insurance, term life, debt plan, RESP | Quantify survivor and disability needs before recommending investments |
| High-income professional with surplus cash | RRSP/TFSA, taxable investing, insurance review, debt strategy | Marginal tax rate, asset location, creditor and liability risk |
| Client nearing retirement with RRSP-heavy assets | Retirement cash-flow projection and withdrawal sequencing | OAS/recovery risk, tax brackets, spouse income, guaranteed income |
| Retiree afraid of market loss | Match essential expenses to secure income and cash reserve | Risk capacity may be lower than historical tolerance |
| Client with concentrated employer stock | Diversification and employment-risk reduction | Tax impact of sale, vesting, restrictions, behavioural attachment |
| Business owner with no succession plan | Shareholder agreement, valuation, insurance, estate freeze/sale planning | Coordinate lawyer, accountant, insurance specialist |
| Client wants to borrow to invest | Suitability of leverage | Cash-flow stress test, tax deductibility, risk capacity, time horizon |
| Disabled adult child | RDSP, trust, insurance, government benefits, estate design | Preserve benefits and appoint appropriate trustees |
| Elderly widow with adult child “helping” | Capacity, authority, cash flow, estate documents, fraud prevention | Speak with client directly; verify POA/mandate |
| Blended family | Estate documents, beneficiary designations, trusts, family-law risk | Avoid accidental disinheritance or tax/liquidity mismatch |
Common CFP® calculation traps
| Trap | Prevention |
|---|
| Mixing annual return with monthly payments | Convert rate and period consistently |
| Ignoring inflation | Use real return or inflate goal spending explicitly |
| Comparing RRSP and TFSA using same after-tax contribution | Compare equivalent pre-tax dollars |
| Treating RRSP refund as extra wealth | Reinvest or account for it in the comparison |
| Forgetting tax on RRSP/RRIF withdrawals | Use after-tax retirement income |
| Ignoring ACB | Track purchases, reinvested distributions, return of capital, and disposition costs |
| Treating book value as ACB | Book value may differ from tax ACB |
| Using pre-tax investment return against after-tax debt cost | Compare on consistent after-tax, risk-adjusted basis |
| Ignoring fees | Use net return after costs |
| Assuming average return solves retirement risk | Sequence of returns matters during withdrawals |
| Forgetting survivor implications | Pension choices, insurance, estate tax, and beneficiary designations affect survivor outcome |
| Using outdated annual limits | Use exam-provided/current figures instead of memorized stale amounts |
Professional exam answer checklist
Before finalizing a case answer, check that you have:
- Identified the client’s explicit goal and the hidden planning issue.
- Separated facts from assumptions.
- Prioritized urgent risks: cash flow, debt, insurance, legal authority, tax deadlines.
- Considered suitability, not just tax efficiency.
- Compared at least one reasonable alternative when the case calls for judgment.
- Stated tax consequences using current exam data.
- Addressed spouse, dependant, business, and estate impacts where relevant.
- Disclosed conflicts, scope limits, costs, and risks.
- Recommended referral to lawyer, accountant, insurance specialist, or investment specialist when appropriate.
- Included implementation and monitoring steps.
Final review priorities
| If time is short | Focus here |
|---|
| Ethics and process | Engagement, conflicts, competence, confidentiality, documentation |
| Tax | RRSP vs TFSA, capital gains, attribution, account location, business-owner issues |
| Retirement | Drawdown order, public benefits, pensions, survivor income, longevity risk |
| Insurance | Needs analysis, disability vs critical illness, term vs permanent, business insurance |
| Investments | Suitability, risk capacity, diversification, duration, after-tax return |
| Estate | Wills, POA/mandates, beneficiaries, deemed disposition, liquidity, blended family |
| Integrated cases | Explain trade-offs and justify recommendations using client facts |
Practical next step
Use this Quick Reference to build a one-page issue map for each practice case: list the client facts, identify the top three planning risks, calculate the required figures, then write a recommendation with rationale, trade-offs, implementation steps, and monitoring triggers.