Financial Planning Supplement (FPSU)

In this chapter, we discuss the history and evolution of financial planning, and we look at the direction it is taking today. We also review the standards of conduct and ethics you must follow as a financial planner. Furthermore, we describe the main steps in the financial planning process, and we provide an example of a typical letter of engagement for clients.

Topics covered in this chapter are:

• The Financial Planning Business Today
• The Personal Financial Planning Process

The focus of this chapter is on how you will work as a financial advisor in an advisory capacity. You will learn how advisors are compensated and how investment advisory firms integrate financial planning into their business models. We examine two different types of financial plans, comprehensive and modular, and we explain how each type of plan can be used to segment clients based on their economic value. Finally, we explain how to optimize client relationships based on these segments and what you can do to differentiate yourself in the financial services industry.

Topics covered in this chapter are:

• Integrating Financial Planning into your Business
• Methods of Compensation
• Comprehensive Versus Modular Planning
• Client Segmentation and Financial Planning
• Reprofiling and Rediscovering Client Relationships by Segment
• Rebranding and Repositioning the Advisor’s Offer

In this chapter, we explore the concept of behavioural finance and what it means in regard to investors’ willingness to take risks. You will learn about the different investor personalities and the different types of biases they are subject to. You will also learn some diagnostic techniques you can use to identify the type of investor you are dealing with and to recognize the biases that may be influencing their investment decisions.

Topics covered in this chapter are:

• What Is Behavioural Finance?
• The Relevance of Behavioural Finance to the Wealth Advisor
• Risk Tolerance Questionnaires and Their Limitation
• What Are Investor Biases?
• What Are Investor Personality Types?
• Diagnosing Biases when Structuring an Asset Allocation Program

In this chapter, you will learn about aspects of business law in Canada relating to contracts and agency relationships. The purpose of the chapter is to acquaint you with how contracts and the agents involved relate to business law. We explain how contracts work with a focus on the importance of the agency relationship in the financial planning industry.

Topics covered in this chapter are:

• Contracts
• Agency

In this chapter, you will learn to differentiate between the various business structures in Canada, and you will learn why a business might choose to operate as a particular type. You will also learn about a financial advisor’s professional obligations in the areas of fiduciary duty, tort law, consumer protection, bankruptcy, and disclosure of fees for credit products.

Topics covered in this chapter are:

• Business Structures
• Fiduciary Duty
• Tort Law and Professional Liability
• Consumer Protection in Canada
• Bankruptcy Law in Canada
• Cost of Credit

In this chapter, you will learn about aspects of family law in Canada relating to rights arising from cohabitation, marriage, separation, and divorce. The purpose of this chapter is to acquaint you with family law rights and obligations arising from relationship breakdown. We focus on both federally and provincially governed aspects of family law. Federal areas of the law include divorce, and for married spouses, custody and access, spousal support, and child support. We also discuss disclosure requirements under federal, provincial, and territorial legislation that are necessary to determine support payments and the equitable distribution of property.

Topics covered in this chapter are:

• Fundamental Aspects of Family Law
• Financial Issues in Family Law
• Property Issues on Relationship Breakdown
• Domestic Contracts
• Impact of Divorce on a Client’s Financial Plan

In this chapter, we look at the key processes involved in risk management and the main methods of dealing with risk. We explain how contract law applies to life insurance contracts, and we describe the provisions of errors and omissions insurance coverage, which insurance regulators in most provinces have made mandatory. Next, we discuss the basic principle of insurance itself, and, finally, we illustrate the method behind a capital needs analysis to determine the appropriate amount of life insurance needed by a particular client.

Topics covered in this chapter are:

• Insurance Industry Regulation
• Risk Management
• Dealing with Risk
• Law and the Insurance Contract
• Legal Liability
• Assuris Basic
• Principle of Insurance
• Life Insurance Needs Analysis

In this chapter, we cover the different types of life insurance available to meet various insurance needs. We also look at the policy provisions found in life insurance contracts and the policy riders that insurance agents may recommend. Then, we explain the crucial concept of underwriting life insurance, and we describe the underwriting process. Finally, we explain, at a basic level, the tax system as it relates to insurance products and the taxation aspects of life insurance.

Topics covered in this chapter are:

• Types of Life Insurance
• Dividend Options
• Policy Provisions
• Insurance Policy Riders
• Underwriting Life Insurance
• Distribution Channels
• Tax System and Insurance Products
• Taxation of Life Insurance

In this chapter, we look at the process of managing risk by using disability insurance. We describe the factors that affect the expected rate of morbidity. We discuss the components to consider when tailoring a disability income policy, and we explain how the definition of disability in the policy determines the conditions under which benefits are to be paid. We discuss underwriting for disability insurance, in contrast to underwriting for life insurance. We cover the most common disability insurance provisions, and we illustrate how to conduct a disability needs analysis. We describe government-sponsored disability income programs, such as EI, CPP, QPP and Workers Compensation, in detail. Finally, we describe some business and personal applications of life and disability insurance.

Topics covered in this chapter are:

• Disability and Morbidity
• Designing the Property Type of Disability Plan
• Definition of Disability
• Underwriting for Disability
• Common Disability Benefit Provisions
• Disability Needs Analysis
• Government-Sponsored Disability Benefit Programs
• Life and Disability Insurance: Business and Personal Applications

In this chapter, we cover other types of insurance that can be used to manage various risks. We discuss critical illness and long-term care insurance, provincial medical insurance, travel insurance, and extended health insurance. We describe the different types of insurance plans that are typically offered by employers, including private plans and group life and health insurance. We discuss creditor insurance, general insurance (including homeowners, automobile, and liability insurance), title insurance, and liability insurance. Finally, we explain how to find an insurance representative and firm with whom a client can build a successful relationship.

Topics covered in this chapter are:

• Critical Illness Insurance
• Long-Term Care Insurance
• Provincial Medical Insurance
• Extended Health Insurance Plans
• Travel Insurance
• Private Health Services Plans
• Group Life and Health Insurance
• Creditor Insurance
• General Insurance
• Title Insurance
• Selecting Representatives and Companies

In this chapter, we cover important information that Canadians living or working in the United States for any length of time should know about U.S. taxation. You will learn about U.S. income tax laws and tax issues around purchasing real property in the U.S. as a Canadian citizen. You will also learn about retirement and estate planning issues for the so-called snowbirds who spend time every year in both countries. Furthermore, we discuss the different types of insurance medical and property insurance snowbirds should have and the differences between insurance provisions in the U.S. and in Canada. Finally, you will learn about the requirements for Canadians seeking permanent residency in the U.S., whether as a lone citizen or as a spouse married to a U.S. citizen.

Topics covered in this chapter are:

• U.S. Income Tax Rules for the Canadian Snowbird
• Purchasing Real Property in the United States
• Taxation of U.S. Investments
• Public Retirement Income System as it Relates to Snowbirds
• Estate Planning for Snowbirds
• Risk Management Issues
• Options Available for Permanent U.S. Residency