CFP Constructed Response

1.

Template #1 – Advantages and Disadvantages

List 2 advantages and 2 disadvantages of an Individual Pension Plan (IPP) (4 marks)

Advantages of an Individual Pension Plan (IPP)

[1 Mark Each]

Disadvantages of an Individual Pension Plan (IPP)

[1 Mark Each]

Advantage #1:

Disadvantage #1:

Advantage #2 :

Disadvantage #2:

 

2.

Template #2 – Time Value of Money (TVM) Calcs

Assuming Stu can continue to make his current contributions to their RRSPs, will their registered savings provide adequate income to meet their stated objectives? [4 Mark]

Value of registered assets at retirement [1 Mark]

Variable Answer Supporting Details
N =
I  =
PV =
PMT =
FV =
MODE = End

Template #2a – Time Value of Money (TVM) Calcs w Final Calc

Annual income required at retirement [1 Mark]

Variable Answer Supporting Details
N =
I  =
PV =
PMT =
FV =
MODE = BGN

Variable Answer Supporting Details
Surplus/(Shortfall) =

 

3.

Template #3 – Lists

If Sandy decided to set up her estate to ensure that a part of her estate would transfer to Jamie on Eric’s death, what are 2 potential strategies that Zoey would recommend? [2 marks]

Asset

Potential Strategies  [2 marks] – can be any 2 of the options below

Option 1

Option 2


Template #3a – Lists + Reason/Rationale

Besides an RESP, what are two other savings options available for individuals looking to save money for a child’s education. For the option selected, provide one supporting reason for when this option would be appropriate for the client [2 marks]

Asset

Potential Strategies

One Supporting Reason

Option 1
Option 2

 

4.

Template #4 – List + Answer + Calc

If Sandy were to die today, what would be her taxable income on the disposition of her assets. Show your calculations and/or provide a brief explanation to support the value of your income inclusion [3.5 marks]

Asset

Addition to Taxable Income

Calculation/Comment

House [1 mark]

Cottage [0.5 mark]

RRSP [0.5 mark]

TFSA [0.5 mark]

Non-Registered Portfolio [0.5 mark]

Life Insurance Policy [0.5 mark]

Total

5.

Template #5: Calc + Three Tiered Answer

If Larry decides to continue using a TFSA to plan for Amy’s education and continue with the current savings strategy, how much would he need to earn if his requirement was save $50,000 for when Amy turns 17. Given this return, what asset mix between equities and fixed income would be expected to achieve this return and would this mix be appropriate for him given his risk tolerance?  [3 Mark]

Required Rate of Return [1 Mark]

Variable Answer Supporting Details
N =
I  =
PV =
PMT =
FV =
MODE = BGN

Required Asset Mix [1 Mark]
Is this Asset Mix Suitable (Y or N) [0.5 Mark]
Supporting Explanation [0.5 Mark]

6.

Template #6: Two Tiered Calc

If Barry decides on Option 2, calculate the immediate taxes payable? Assume Barry, Lee and Michael will each have equal ownership (1/3 of the property each)

[1.5 Mark]

Taxes Payable [0.5 Mark]

Calculations [1 Mark]

Template #6a: List with Two Tiered Calc

What is the expected gross and net rates of return for Jane’s investment portfolio? [3 Mark]

Asset Allocation [1 Mark]

Time Period

Gross Return [1 Mark]

Net Return (after fees) [1 Mark]

Asset allocation prior to restructuring

Pre-retirement

Retirement

Template #6b: List with One Tiered Calc

Jimmy has recommended a portfolio with the following data:

Balanced Growth Portfolio

      • Fund Beta = 0.8
      • One-Year Historical Return = 10%
      • Expected Annual Rate of Return = 6%
      • Standard Deviation = 7%

Calculate the Sharpe Ratio and Alpha for both Roger’s mutual fund portfolio and Jimmy’s recommended portfolio. Finally, recommend the best option and an appropriate rationale? [5 Mark]

Sharpe Ratio [2 Marks]

Formula for Sharpe Ratio

Current Portfolio

Balanced Growth Portfolio

7.

Template #7 – Single Written List

Based on the fast that Malcolm has lost his job, list three strategies that could help him and Sandra prepare for retirement if their savings and cash flow were to become constrained: [1.5 Mark]

Potential Strategies [0.5 mark each]

8.

Template 8a – List + Time Series

If Jim takes Becky’s recommendation at decides to allocate the funds from his mother’s GIC to his RRSP, what is the additional amount that will be added to his RRSP at age 60? [6.5 Mark]

Value of maturing GICs received from Jim’s mother at maturity [2 Mark]

Year 1; Age 54

Year 2; Age 55

Year 3; Age 56

Year 3; Age 56

Interest rate

Value at maturity transferred to John

Template #8a – List + Time Series + Final Answer

 

Additional amount added to Jim’s RRSP [2 Mark]

Year 1; Age 54

Year 2; Age 55

Year 3; Age 56

Year 3; Age 56

N =

I =

PV =

PMT =

FV =

MODE =

END

Jim’s additional RRSP Holdings at age 60 =

9.

Template #9: Two Tiered Written Answer

To prepare for retirement, reduce their taxes payable and take full advantage of their income splitting opportunities, outline 3 strategies you would recommend to the couple? [3 Marks]

 

Strategy [0.5 Mark Each]

Explanation [0.5 Mark Each]

Template #9a: Four Tiered Written Answer

Based on the calculations in Question 3, answer the following as they relate to retirement planning for Jane and Jan [4 Mark]

How will a rate of return higher than the projections affect their retirement plans? [1 Mark]

How will reducing the equity exposure from 80% to 60% affect future returns? [1 Mark]

How will reducing the equity exposure from 80% to 60% affect future returns? [1 Mark]