Financial Planning Week 1- Intro to the Course

What is Canada’s household debt level relative to disposable income?

Approximately 170% of disposable income

What does a 170% household debt ratio mean?

The average Canadian owes $1.70 for every $1 earned after taxes

Does the household debt figure apply equally to all Canadians?

No, it includes highly indebted individuals and those with no debt

How much wealth is expected to transfer between generations by 2026 in Canada?

Approximately $1 trillion

Why is the generational wealth transfer significant?

It is the largest in Canadian history and requires advisors to connect with younger generations

What demographic factors impact the financial environment?

Population demographics and current savings rates

What is the primary purpose of financial planning?

To act as a proactive roadmap to achieve financial objectives

What is cash flow management?

Ensuring monthly income covers expenses

What is capital accumulation?

Setting aside funds for future goals, often using the 10% “Pay Yourself First” rule

What does a lifetime perspective in financial planning address?

Protection against job loss and funding retirement

Why is planning important for dependents?

To fund education and provide insurance for death or illness

What is the tax and investment objective of financial planning?

Minimize taxes while maximizing investment returns

What is a short-term time horizon?

Within 1 year (sometimes up to 3 years)

What is an intermediate-term time horizon?

1 (or 3) to 10 years

What is a long-term time horizon?

More than 10 years

What age range defines the pre-career stage?

0–22

What age range defines early earning?

23–30

What age range defines mild earning?

31–44

What age range defines prime earning?

45–59

What age range defines retirement?

60–74

What age range defines post-retirement?

75+

Why must financial goals be prioritized?

They are often ambitious and limited by time and resources

What influences goal prioritization?

Life stage and time horizon

Is the title “Financial Planner” regulated in Canada?

No, except in Quebec

How is financial planning regulated in Quebec?

Certification is mandatory through the IQPF

What is FP Canada?

A national body that certifies CFP and QAFP professionals and sets ethical standards

What is the FPSB?

The Financial Planning Standards Board that owns the CFP mark globally

What is financial planning?

A disciplined, multi-step process aligning current resources with future goals

Who is a financial planner?

A professional who provides objective advice and prioritizes the client’s interest

What is a financial plan?

A written report covering investments, retirement, tax, estate, legal, and financial management

What are the core elements of the Code of Ethics?

Loyalty, Integrity, Objectivity, Competence, Fairness, Confidentiality, Diligence, Professionalism

What are the Rules of Conduct?

35 specific rules governing professional behavior

What are Fitness Standards?

Barriers to certification such as bankruptcy or academic misconduct

What are Practice Standards?

10 standards guiding the delivery of financial planning

What type of relationship exists in financial planning?

A fiduciary relationship

What is reliance in a fiduciary relationship?

The client depends on the advisor’s judgment

What is the first step in the financial planning process?

Develop financial goals

What is the final step in the six-step model?

Review and revise the plan

What does the “Explain” step involve in FP Canada’s process?

Explaining the planner’s role and value

What happens during the “Gather” step?

Collecting client financial information

When are recommendations presented?

During Develop & Present

When are actions executed?

During Discuss & Implement

What two statements assess a client’s financial situation?

Net Worth Statement and Cash Flow Statement

What does a Net Worth Statement measure?

Financial position at a point in time

What is the net worth formula?

Net Worth = Total Assets − Total Liabilities

What are fixed outflows?

Debt service and food

What does vulnerability mean in a fiduciary relationship?

Disparities in knowledge, age, or experience make the client vulnerable

What does trust mean in a fiduciary relationship?

The advisor must accept the confidence the client places in them

What does discretion mean in a fiduciary relationship?

The advisor often has power over the client's affairs

What is The Six-Step Model: Develop financial goals?

1. Develop financial goals.

2. Determine current financial situation.

3. Identify alternative courses of action.

4. Evaluate alternatives (considering risk, opportunity costs, and economic factors).

5. Create and implement the financial action plan.

6. Review and revise the plan.

What is the FP Canada Detailed Process?

1. Explain – the planner’s role and value

2. Define – terms of engagement

3. Identify – the client’s goals and priorities

4. Gather – client information

5. Assess – current financial status

6. Identify & Evaluate – strategies to meet goals

7. Develop & Present – recommendations and rationale

8. Discuss & Implement – actions and timeframes

A 27-year-old client has $18,000 in student loans, $2,000 in savings, and just started a full-time job. Which lifecycle stage are they in, and what should be their top financial priorities?

Pre-career or early earning stage; priorities include managing cash flow, building an emergency fund, and reducing high-interest debt.

A 52-year-old client earns $140,000, has a paid-off home, maxed RRSPs, and minimal debt. How does their lifecycle stage affect their investment and risk strategy?

Prime earning stage; focus shifts toward wealth preservation, tax efficiency, retirement planning, and managing investment risk.

Why must financial goals be prioritized differently for a client aged 30 versus a client aged 65?

Differences in time horizon, remaining earning years, and proximity to retirement affect goal urgency and feasibility.

A retired couple (age 72) holds most of their wealth in growth equities. Identify one concern and one recommended adjustment.

Concern: high market risk and income instability; recommendation: shift toward more stable, income-producing or lower-risk investments.

S.M.A.R.T framework

• Specific

• Measurable

• Achievable

• Relevant

• Time-bound