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Have You Started? - Post #01 - FPSC Level 1 Examination - December 2017

Posted by John Gobeil on

Hi there,

The FPSC Level 1 Examination is the first of two exams that must be passed to obtain CFP® certification. We are sending you this email because you have purchased study aids for the FPSC Level 1 Examination (FPE1) on Friday December 1, 2017.

This Post is to provide you with the information that can assist you in passing the FPE1 in your pursuit of the CFP® designation.

In this Post, we will look at feedback from previous candidates, changes to the Financial Planning Practice Standards, the knowledge required to pass the FPE1, the CFP® Professional Competency Profile and studying to acquire adequate technical knowledge.

Gobeil's Collection of 1,000 Questions™

The questions on the FPE1 are not as difficult as those on the CFP Examination of the old program. As a result, some of the questions in our Collection of 1,000 Questions are more difficult than you will find on the FPE1.

When this first became apparent, we asked our customers whether we should dumb down the questions to the current level of the FPE1. The overwhelming response was, “No, if I can handle your stuff, I can handle the FPE1.”

However, there was some criticism on the FPSC bulletin board about the difficulty of our questions, particularly from those who bought them just before the FPE1 and did not have enough time to complete them all.

So, we have placed the difficult questions in separate banks. You can do the difficult questions or not. We also broke the large banks of questions, such as income tax planning and investment planning, into smaller banks of 50 or so questions.

Nature of the FPE1

The Guide to Examinations for CFP® Certification says:

“The FPSC Level 1 examination is a competency-based examination of up to four hours in duration. The examination consists of approximately 95 multiple-choice questions. The questions are a combination of stand-alone, multiple-choice questions and two case studies with related multiple-choice questions.

Each question focuses on specific elements of the CFP Professional Competency Profile and may also require integration across several financial planning areas. The FPSC Level 1 Examination Blueprint outlines how the various components of the Competency Profile will be weighted on the examination.”

The FPE1 Blueprint outlines the allocation by question format. Candidates must select the most appropriate or best answer from the options provided for the scenario presented in the question. There is only one correct answer for each question, and marks are not deducted for incorrect responses.

Each question is worth one point toward the total examination mark. FPE1 is written electronically at computer-based testing facilities. Although FPE1 will be administered on a computer, candidates will be provided with a paper version of the case study scenarios.”

The FPE1 of November 2016 was four hours in duration and there were a total of 93 multiple-choice questions. There were 73 stand-alone technical questions and two case studies each with 10 questions.

Feedback

“I studied so hard and, as many other people, I ran out of time. I started with the case studies. I spent way too much time on those questions, and then, of course, I ran out of time for the other questions.”

“The part I found most difficult about the exam was trying to pick the BEST answer.  There always seemed to be two that were very close.  I thought your study aid was excellent.  There were not very many calculations. I wrote the exam before and there seemed to be a lot less tax and insurance questions.  The focus this time seemed to be on asset management and retirement planning.”                                           

“The most beneficial message in your emails was your insight into the logic behind the questions and direction in how and what to study from a common sense stand point – this made a huge difference to my study. It allowed me to focus on areas likely to be tested and they were. I felt confident and prepared.”

“The case studies were around 6 or 7 pages long and the last two pages were the financial statements. Reading a case ate up a lot of time. I took your advice and started the case studies first as it allowed me sufficient time and I knew I would struggle searching for data in the last few hours. I think I should have practiced these more; getting information out of long case studies would have helped a great deal.”

“I did not have any trouble with the case studies. I just needed more time.”

“There was so much information that it took longer than I expected to wade through the issues. Some of the case study questions were very simple; others took a spectacular number of calculations and searching data.”

“I implemented the tactical methods that you suggested to be most effective for this type of exam and I felt that they worked well for me. This time I was better in managing my time and I was able to finish in time, which is a great improvement. I almost ran out of time preparing for this exam and I need to start preparing much earlier than I planned. Thanks for putting together a great set of study aids.”

Financial Planning Standards Council (FPSC)

The FPSC has essential information for your success on their website. You should go to the website of the FPSC and get copies of:

  • The CFP® Professional Competency Profile;
  • The Guide to Examinations for CFP® Certification;
  • FPSC Level 1 Examination in Financial Planning Blueprint;
  • The Standards of Professional Responsibility for CFP® Professionals and FPSC Level 1™ Certificants in Financial Planning, which includes The Code of Ethics and Financial Planning Practice Standards;
  • Guidance to FPSC® Financial Planning Practice Standards; and
  • FPSC Continuing Education Guidelines.

Read through the pages of the Guide to Examinations for CFP® Certification that apply to the FPE1, the CFP® Professional Competency Profile and the Blueprint.

You will need the Standards of Professional Responsibility and the Continuing Education Requirements to answer questions on Professional Practice.

The FPSC® Financial Planning Practice Standards

The FPSC has “refined” the Financial Planning Practice Standards as described on http://www.fpsc.ca/cfp-professionals/refinements-financial-planning-practice-standards

Essentially, they have added a new Practice Standard 1 and the Practice Standard for Monitoring a Plan has disappeared.

Practice Standard 1, Explain the Role of the Financial Planner and Value of the Financial Planning Process - Ensure the client understands the role of a financial planner and the value of the process of financial planning in identifying and meeting the client’s personal goals, needs and priorities.

This practice standard is intended to educate clients around what to expect of financial planning and the value proposition of the financial planner, and to help engage clients in the multi-step financial planning process, which is equally dependent on the knowledge and skills of the financial planner and the candour of the client in fully disclosing his/her personal and financial situation (Guidance to FPSC® Financial Planning Practice Standards).

However, what was rather strange is that the famous six-step financial planning process promoted by the FPSC for the last 17 years has disappeared from their website to be replaced by “The Practice Standards outline the process to be followed …”.

The FPSC has also released Guidance to FPSC® Financial Planning Practice Standards at http://www.fpsc.ca/docs/default-source/FPSC/guidance-to-fpsc-financial-planning-practice-standards.pdf

So, now we have a 6 step financial planning process with 10 practice standards, but monitoring the plan has sort of disappeared.

We have included 25 questions on the revised Financial Planning Practice Standards in the Collection of 1,000 Questions.

Expanded Continuing Education Categories

The FPSC has expanded what qualifies as Continuing Education (CE) to include activities focused on Professional Responsibility, developing practice management skills, acquiring relevant product knowledge, and helping to advance the financial planning profession.

Each CFP® professional must acquire at last 25 verifiable continuing education credits (CE credits) each year: a minimum of 10 credits linked to the CFP Competency Profile, a minimum of 1 credit from the category of Professional Responsibility, and a maximum of 5 credits in each of the other three CE categories of Product, Practice Management and Giving Back.

There are now five categories of CE: Financial Planning, Professional Responsibility, Product, Practice Management and Giving Back.

Financial Planning CE activities are CE activities that are related to one or more aspects of the Competency Profile, including the financial planning components, professional skills and technical knowledge.

Professional Responsibility CE activities are CE activities that are related to the FPSC® Code of Ethics, FPSC® Rules of Conduct and FPSC® Financial Planning Practice Standards.

Practice Management CE activities are CE activities that lead to the development of knowledge and skills used in building professional relationships and growing a professional practice. CE in this category may include activities focused on prospecting skills, business development behaviors, actions and/or processes, business planning skills, networking skills and sales skills.

Product CE activities are CE activities that lead to the development of the product knowledge that planners may use to advise on and sell products or comment on products held by their clients. CE in this category may be focused on any financial planning product including investment, insurance, or debt.

Giving Back CE activities are CE activities that lead to the development of knowledge and skills from volunteering with community organizations, industry associations, charitable groups or others in a way that helps Canadians understand the importance of financial planning and enhances their financial well-being. It may also include instances where CFP professionals are using their financial planning skills in a volunteer capacity to support an organization.

Knowledge and Skills

In your preparation for the FPE1, you will undoubtedly focus on learning technical concepts. However, you will also require some finely-honed, exam writing skills.

One candidate who passed sent us the following note:

“In preparing for the exam, the most important thing that I have learned was that I needed the necessary technical knowledge, but I also needed excellent exam writing skills. I could only pass The CFP® Exam when I had both knowledge and skills.”

In subsequent emails, we will describe these exam writing skills, as well as provide you with information on the format of the FPE1 and technical knowledge on topics, such as the Federal Budget.

Technical Knowledge 

Most candidates are very concerned about their technical knowledge.                   

The FPSC used to publicize the fact that you needed at least 70% in order to pass the Exam. Then, they said that they were no longer going to use 70% as the minimum mark and would determine the pass based upon other performance criteria, but they were not increasing the standards to pass the Exam. So, in order to pass the FPE1, you must be able to answer at least 70% of the questions correctly.

Based upon recent feedback from candidates, the questions in our Collection of 1,000 Questions are generally more technically difficulty than those on the Exam. Any one of these questions could be on the Exam.

You must have a good understanding of the concepts and their application to client situations. This does not mean being able to do the most complex calculations, nor does it mean having an intimate knowledge of obscure provisions of the Income Tax Act.

There will be questions on the Exam that we could not answer because we could not figure out what they were asking, we did not remember some rate or rule, or we just made an error in answering the question. You may have the same experience, but you can get 30% of the questions wrong and still pass.

Technical knowledge in Professional Competency Profile

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

Every question on the Exam will include a client situation and require you to analyze the information about the client. This analysis may only require you to calculate some amount or it may require you to evaluate financial planning strategies.

Awareness and Understanding

Based upon the courses that you took in order to be eligible to write the FPE1, you should already have adequate knowledgeable of the topics that are classified as Awareness and Understanding.

Some of these Awareness topics are rather obscure, such as 109.02 At-Risk Rules, and would unlikely be central to a question.

It is hard to envision how the topics in Section 700 Economic and Regulatory Environment, which are all classified as Understanding, would be examined as a client situation. There are many other topics that you might strike out with a red pen because they are not likely to form such a question.

Awareness and Understanding topics include 101.04 Administration and Enforcement, 110.03 Federal/Provincial Surtaxes, 401.01 Pension Standards Act, 502.03 Clauses of a Will, 1001.05 Application Requirements and Deadlines for CPP and 1102 Human Behaviour.

So, the structure of the questions means that there are a number of topics in Appendix B that are extremely unlikely to be examined.

So, do not spend any time studying the Awareness and Understanding topics.

Detailed and Expert

The topics that are classified as Detailed and Expert should be the focus of your studies. You must always consider that while some of these topics may be very unlikely to be on the FPE1, they may not have been adequately addressed to this depth in your courses.

As the definition of Expert, the Profile says that you must have in-depth knowledge of the topic and all the ramifications in order to fully analyze the client’s particular situation, weigh all relevant options, including the most sophisticated strategies and obscure details, and synthesize all information to make specific client recommendations. You must be able to draw inferences and explain all of the impacts of the strategies and recommendations on other client goals.

The definition of Detailed is very similar to Expert, but a little less intense, requiring a strong working knowledge, rather than an in-depth knowledge. If you know the difference between these levels of knowledge, please send us an email.

The 27 Expert topics include topics in 406 Registered Retirement Savings Plans, 407 Registered Education Savings Plans, 409 Tax-Free Saving Accounts and 801 Standards of Professional Responsibility.

So, you would best spend your time focused on topics classified as Detailed and Expert, and trust that you have enough of Awareness and Understanding.

Studying to acquire adequate technical knowledge

You need to understand a great number of concepts, such as the concept that a trust is a separate legal entity from a beneficiary; that some investment risk can effectively be eliminated by diversification; and that a segregated fund is a contract, but it is taxed as a mutual fund.

You will develop an understanding of these concepts by reading about them and examining examples of how they could apply to a client’s situation. You can make notes about them, but you cannot really memorize them.

You need to be able to do many calculations. Some of these are relatively simple and some are complex. You should be able to quickly calculate a taxable capital gain. Some of these formulas are frequently used in financial planning and many are not.

Use your judgement as you come across these formulas. If you understand what you are calculating and how the factors affect the calculation, you will not need to memorize the formula. If you do not understand the formula and you surmise that it is important, you better spend some effort to understand it because just memorizing it may not be enough.

There are many income tax rates; some of which are common and some are obscure.

We can all recall the capital gains inclusion rate of 50%. However, can you recall the clawback thresholds for the Canada Child Benefit? The former you need; the latter you do not. You should know that the amount for the disability tax credit is about $7,000.

There is a very small set of rates that you need to remember; there are some, such as the disability amount, that you only need to have an idea as to roughly their value; and there are many, such as the clawback threshold, that neither you nor any other candidate could or would need to remember.

Future Posts

To help you with your exam preparation, we will send you an email every now and again with a link to a blog post like this that describes knowledge and skills that you require to pass the Exam.

You can ensure that you receive future emails by setting up your email to look for email from inquiries@gobeil.ca and keys@gobeil.ca.

In our next Post, we will look at the FPE1 Blueprint and further consider how you can acquire the technical knowledge that you need.

 Effectiveness of our study aids

We always appreciate feedback on the effectiveness of our study aids. Together, we can continue to have the best study aids available.

Regards,

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


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