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Competency Profile - Post #09 - FPSC Level 1 Examination - December 2017

Posted by John Gobeil on

The FPSC Level 1 Examination is the first of two exams that must be passed to obtain CFP® certification. We have posted this entry to assist you in your preparation for the FPSC Level 1 Examination (FPE1) on Friday December 1, 2017.

In our last Post, we provided the solutions to the two questions on investment funds.

In this Post, we will look at the Competency Profile: distinguishing between Collection, Analysis and Recommendation.

The Competency Profile

The CFP® Professional Competency has guidance as to the levels of technical knowledge required. If you have not done so already, you should go to the website of the FPSC and get a copy of The CFP® Professional Competency Profile.

The required technical knowledge with the topics classified as to levels of knowledge is included in Appendix B. We suggest that you print a copy of Appendix B and use it as a checklist.

We are always anxious when we look at the Competency Profile.  It is an awful lot to expect a novice planner to have acquired all of the knowledge and skills.  After many years in the profession, we still find it a challenge just to keep up with it all.  Perhaps, this will give you more insight as to how they use the Profile in preparing for the exam.

The FPSC develops an exam question by first selecting a competency.

The first financial planning function is Collection, “Collects the information required to develop a financial plan”. 

The following question addresses Competency 1.110, “Collects the information necessary to establish the client’s taxable income, deductions and credits”.

 At the time of his death in January, the fair market value of John's RRSP was $185,000. John was single at the time of his death with no financial dependants.  After his death, the value of the RRSP declined and the trustee of the RRSP paid John's estate $175,000 in final settlement of the RRSP.

What should his personal representative do?

(A) Deduct a loss of $5,000 on John's final return.
(B) Deduct a loss of $5,000 on the income tax return of John's estate.
(C) Deduct a loss of $10,000 on John's final return.
(D) Deduct a loss of $10,000 on the income tax return of John's estate.

You probably would have considered such a question something beyond Collection.  You might have thought that it addressed the second financial planning function, Analysis. However, the FPSC has its own terminology.

The FP Blueprint says questions on Collection will comprise 35% to 45% of the Exam. Most of the questions that you have seen in your courses were Collection.

The second financial planning function is Analysis, “Assesses the client’s situation and identifies and evaluates appropriate strategies.” Analysis competencies encompass identifying issues and opportunities, performing required calculations, developing projections, and preparing and assessing the resulting information in order to identify and evaluate appropriate strategies. Questions on Analysis will comprise 36% to 46% of the Exam.

The third financial planning function is Recommendation, formerly called Synthesis, develops recommendations to help optimize the client’s situation. Recommendation competencies focus on the development of recommendations, in order of priority, that help meet the client’s personal goals, needs and priorities and strive to optimize the client’s situation. Questions on Recommendation will comprise 14% to 24% of the Exam.

The following question addresses Competency 3.113, “Formulates tax planning strategies”.

Art is a widower who has just turned 80 years of age.  He is in good health.  Art has four children.  He would like to leave the cottage to his son, Bert.  Art wants to leave each of his children an equal amount of his estate.  Art should:

(A) Do an installment sale.
(B) Transfer the cottage to an inter vivos trust.
(C) Change the ownership to joint tenancy.
(D) Use his principal residence exemption.

This is a lot tougher than calculating Art’s RRSP contribution room or something similar. Think about your answers and we will provide ours next week.

We also suggest that you examine the Competency Profile.  In particular, consider the kinds of questions that can arise from the second and third financial planning functions, Analysis and Recommendation.

Next Post

In our next Post, we will provide the solutions to the two questions on income tax.

John Gobeil, BSc, CFP®
David Gobeil, CPA, CA, CFP®

Certified Financial Planner® and CFP® are certification marks owned outside the U.S. by the Financial Planning Standards Board Ltd. The Financial Planners Standards Council is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB.

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