Financial Planning Key Terms

ANALYSIS

The identification of issues and/or opportunities, development of projections and calculations, and assessment of resulting information to enable the formulation and evaluation of appropriate strategies.

ASSET ALLOCATION

An investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets between assets classes, including equities, fixed income and cash, according to the client’s goals, investment objectives, time horizon and risk tolerance.

BUDGET

A statement of the expected or desired future inflows and outflows of cash for a given period in the future.

CASH FLOW STATEMENT

A statement that summarizes the client’s cash inflows and cash outflows for a given period.

CLIENT

The individual with whom the FP Canada certificant has the formal planner-client relationship. “Client” can also refer to the spouse, children, family, and other parties or entities related to the individual client, where appropriate and explicitly stated.

COLLECTION

The gathering of quantitative and qualitative client information and supporting documentation and preparation of the information to enable analysis.

ESTATE PLANNING

The assessment of a client’s estate wishes, and development of strategies and techniques to help ensure the payment of expenses and obligations at death; also includes the efficient transfer of assets to beneficiaries based on the client’s goals.

FINANCIAL MANAGEMENT

The assessment of a client’s cash flow, budget and net worth and the development of strategies and techniques to optimize short- and mid-term saving, spending and borrowing decisions to meet the client’s goals.

FINANCIAL PLANNING AREAS

These include Financial Management, Investment Planning, Insurance and Risk Management, Tax Planning, Retirement Planning and Estate Planning and Legal Aspects.

FINANCIAL PLANNING FUNCTIONS

In the context of the FP Canada Standards Council Competency Profile, this refers to the high-level financial planning activities of Collection, Analysis and Recommendation.

FINANCIAL PLANNING PROCESS

The process by which FP Canada certificants develop strategies to assist clients in managing their financial affairs to meet life goals. This process is defined by the FP Canada Standards Council Practice Standards.

FUNDAMENTAL FINANCIAL PLANNING PRACTICES

The elements of competency that are pervasive across all financial planning areas. These elements of competency relate to the integration and interrelationships among the financial planning areas.

INSURANCE AND RISK MANAGEMENT

Strategies and techniques to manage exposure to potential financial loss due to personal circumstances. In this financial planning area, the terms “risk”, “risk exposure” and “risk tolerance” refer to the risk of financial loss due to personal circumstances, as opposed to investment risk.

INTEGRATION

The collection, analysis and recommendation of client information across the various financial planning areas, considering all interrelationships and interdependencies, and the requirement to prioritize recommendations to optimize the client’s financial situation.

INVESTMENT PLANNING

The assessment of a client’s asset mix and holdings, based on investment knowledge, objectives, risk tolerance and time horizon, and the development of strategies and techniques to optimize the client’s portfolio and resulting returns to meet the client’s financial goals.

NEED

A necessary item or condition.

NET WORTH STATEMENT

A statement of assets minus liabilities.

OBJECTIVES

An outcome that is sought after or aimed for. For the purposes of the FP Canada Standards Council Competency Profile, objectives are synonymous with goals.

PERSONAL FINANCIAL STATEMENTS

Net worth statement, cash flow statement and budget, in aggregate.

QUALITATIVE INFORMATION

Information that pertains to the qualities, values, attitudes, biases and preferences of the client.

QUANTITATIVE INFORMATION

Information about the client that is objective and directly measurable or observable.

RECOMMENDATION

The development and evaluation of strategies based on an assessment of information.

RETIREMENT PLANNING

The assessment of a client’s expected lifestyle in retirement, comparison of estimated needs to current retirement assets, planned savings and expected return on investment, and the development of strategies and techniques to bridge any gaps. It also involves the assessment of retirement income options, and the development of strategies and techniques to meet the client’s income needs.

STRATEGY

A proposed method used to achieve one or more specific objectives. For the purposes of the FP Canada Standards Council Competency Profile, strategy may also refer to multiple strategies.

TAX PLANNING

The assessment of a client’s current tax position, and the development of strategies and techniques to minimize or defer taxes and maximize the client’s after-tax income