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Please select the Module from the list given below related to your query. FAQs of Module 2
These expenses need to be deducted from the surplus to determine the net economic gain in terms of HLV meant for the family. The effort is to protect this estimated future economic value being contributed to the family through a life insurance policy. where H = Human Life Value Example Shetty's present age is 38 years and wishes to retire at age 60. Present salary is Rs 3,00,000 per annum. Total Life Insurance premiums paid Rs 30,000 p.a. (including children's and wife's policy). Income Tax amounts to Rs 45,000. Medical expenses are being reimbursed by the company and self maintenance expenses Rs 36,000 (including entertainment, club membership, sports) The calculation as per the above formula would be: Surplus income generated for the family = Rs 1,89,000 Now this income needs to be capitalized through discounting at an appropriate rate ( say 8% p.a.) for the next 25 years i.e. 189,000 x 11.0168 = Rs 20,82,175 From a financial calculator perspective 1,89,000 is the payment 22 is n (no.of years for the payment) 8 is the % (discoaunt factor) You need to calculate for PV (the present value) The assumption in the calculation is that the present income will continue to remain the same (an adjustment for inflation and forseen sickness, partial disability or unemployment for a short term). The above HLV is only a representative economic value of the individual for his family and needs to be protected with life insurance cover against premature death or permanent disability TOP 1st Step Solution: 2nd step: 3rd step THE AMOUNT OF INSURANCE REQUIRED UNDER THE NEED BASED APPROACH IS Rs 20 Lacs In the income replacement method the effort is to produce a level of income in line with that currently being received - but adjusted for dependents need only. For e.g in the question: Mr. Rao's income post tax is Rs 3.5 lacs. Adjusted for dependent's need only the amount required is Rs 2 lacs. To arrive at the capital needed to produce that amount would be Rs 2 lacs divided by .03 which is Rs 66,66,667. To this you add the final costs of Rs 1,00,000 THE TOTAL INSURANCE REQUIRED UNDER THE INCOME REPLACEMENT METHOD IS Rs 67,66,667 or Rs 68 lacs FAQs of Module 4 When these expected values of dividends to be received in the future are discounted to the present value with an appropriate discount rate to reflect the riskiness of the share, it is called the intrinsic or fundamental value of the share. A share quoting below this intrinsic or fundamental value should be bought and vice versa. The approach of fundamental analysts is to find such under or overpriced shares for their investment decisions. With a firm belief that even though the share price may deviate from their fundamental value in the short-term, these prices will eventually reflect the fundamental value in the long run. Thus justifying the decision made earlier. 5. How do we calculate the beta of a security. Beta = (correlation between sec j and the market) (std dev. of sec j) 8 Regards fixed interest rate securities it is said that "there is negative relationship between price and yield ". Which price are they talking about and what is the relation it holds? Tender/Auction - Bids are accepted for a certain time and the borrower accepts the lowest rate when bids are evaluated. T-Bills are issued via this method. Based on bids received at the auctions, RBI decides the cut-off yield and accepts all bids below this yield. Towards this purpose RBI deals regularly, usually daily, in domestic markets for the purpose of managing the supply of liquid funds available to the banking system. The bank deals in Central Government securities of upto one year to maturity and in repurchase agreements (RPs) based on Central Government securities. The Reserve Banks rediscount rate for Treasury notes are made public from time to time, varying in line with current market rates and therefore serve as reference to money market rates. All T-Bills are now sold through an auction process according to a fixed auction calender, announced by RBI
In such a case, what happens to the money collected ? Where does it remain in the system and what happens to it at the end of the current fiscal? T-Bills are issued for 91-day and 364-day, by auction at a discount, by the government to meet short term finance needs. Banks are usual investors not only to park their short term surpluses but also beacause they form part of the banks SLR requirement. T-Bills are redeemed at par at the end of its tenure. What it the difference between Govt. of India Securities, Relief Bonds and Govt. Agency Securities. The three main debt segments in the Indian debt market are: 1 Government securities 1 Government Security 2 PSU bonds 3 Corporate bonds 4 Banks Some PSU bonds are tax free, while most bonds including government securities, are not tax free. RBI also issues a set of tax free bonds, called the 8.5% RBI relief bonds (a popular category of tax free bonds in the market) Regulator The debt market also has a large non-securitised, transaction based segment, where players borrow and lend against themselves.These are typically short term segments and comprise of call and notice money market, which is the most active segment in the debt market, inter-bank market for term money, markets for inter-corporate loans and markets for ready forward deals (repos) 1. Financial planning is the process of meeting a person's life goals through the proper management of their finances. Financial planning helps a person make advance provision for financial needs that will arise in the future. The financial planner takes stock of the existing resources of the client, identifies the shortfall to meet the objectives of the client and sets up a plan to meet those objectives. It includes investment planning, tax planning, insurance planning, cash management and budgeting, retirement planning and estate planning. 2. A financial planner is a professional who carries out the financial planning process as follows: a) Establishing and defining the client- planner relationship b) Garthering client data, including goals c) Analyzing and evaluating the client's financial status d) Developing and presenting financial planning recommendations and/ or alternatives e) Inplementing the financial planning recommendations f) Monitoring the financial planning recommendations . 3. The CFPCMprogramme is a comprehensive educational tool to equip the prospective financial planner with the requisite knowledge to be able to advise a client on meeting his or her personal and financial goals There are six modules for completing the CFPCMcourse. The six modules are: Module 1 - Introduction to Financial Planning Module 2 - Risk Management & Insurance Planning Module 3 - Retirement Planning and Employee Benefits Module 4 - Investment Planning Module 5 - Tax planning & Estate Planning Module 6 - Financial Plan Construction . 4. The AFP is the Association of Financial Planners. It is a non-profit professional association dedicated to developing and promoting an industry providing unbiased financial advice to the Indian public. The charter members of the AFP are some of the biggest and best providers of financial services in India. Founded in Denver, Colorado, in 1985, the CFPCMBoard is an independent professional regulatory organization that owns the CFPCMand Ceritified Financial PlannerTM and ® certification marks. As the Indian affiliate of the Certified Financial Planner Board of Standards (CFPCMBoard), AFP will oversee the administration of the internationally recognized 'Certified Financial Planner' professional certification process. 5. In order to enroll for CFPCM professional education programme, a candidate has to register himself with the authorised education provider of AFP, International College of Financial PlanningTM., and register himself as student member of AFP which is automatically done at the time of registering with the College. 6. The course duration is a minimum one year while an individual can take a maximum of seven years (inclusive of getting the required work experience of 3 years) to complete the course. 7. The requirements are laid down as 4 E's. A person has to be atleast a Graduate at the time of registeration. A CFPCMaspirant has to complete the curriculum of six modules for CFPCM, in addition of having at least three years of relevant work experience that may be acquired before commencement of the education programme; while doing the education programme; or after completion of the education programme, but with in a maximum span of seven years of joining the programme. In addition, he/she must abide by the code of ethics and rules of professional conduct of the Association of Financial Planners. 8. The 'Certified Financial Planner' is the highest professional certification mark in the financial planning profession. It is an international designation and well recognized in most developed countries around the world including countries like U.S.A, Canada, Australia, United Kingdom, Germany, and France etc. However, to practice, one will have to go through country specific supplementary examination for country specific recognition. 9. If a student member fails a module, he/she will have to re-register for that examination for which a re- examination fees would be charged. 10. A student member is allowed to complete all the requirements of the CFPCM certification process (including 3 years work experience) within 7 years of registering as a student member. He/she can take as many attempts as required within the overall limit of 7 years. 11. The inaugural course fee for CFPCMeducation program in India is INR 48,000 which is payable in easy installments. For more details you may visit CFPCMProfessional Education Programme page . 12 As CFPCM is a vast course covering almost all the aspects of Finance industry, there is no specific book covering all the areas. However, International College of Financial PlanningTM. has prepared a complete study material containing a chapter wise list of reference material and suggested readings. The same is based on course material sourced from the Financial Planning Association of Australia Ltd. and customized to Indian requirements. This course material is adequate to clear all the examinations of the CFPCM Program. The education programme of the College has been created in technical association with FPA of Australia Ltd. which is regarded as one of the best CFPCM Certification Programmes internationally. 13. There is no fixed number of hours of study required to clear the examinations. The duration may vary from individual to individual. It is suggested that you follow the study advice given at the beginning of the course modules.
15. The examinations will be held at designated examination centers all over the country 16. The examination papers will be set by the Education committee of FPSB. 17. Holders of the CFA designation are securities analysts, money managers and investment advisors who focus predominantly on the analysis of investments and securities of particular companies or industry groups.The 'big picture' approach is what sets the Financial Planner apart. The CFPCMcertification is a broad based and comprehensive education programme for Financial Advisors. The Financial Planner uses the financial planning process to help a client determine whether and how he or she can meet life goals. The big picture view addresses a host of inter- related issues such as budgeting, tax planning, investments and risk management, or by focusing on a limited number of financial concerns within the context of the client's overall situation
19. There is no necessity to attempt all the modules in sequence but one has to start with Module 1 and end up with Module 6. One may choose any module in any sequence amongst Module 2 to Module 5. 20. FPSB recognizes equivalently qualified candidates who want to pursue the CFPCMcertification program. These candidates are called challenge status candidates. Challenge status candidates are allowed to challenge the particular examination directly without fulfilling the education criterion for that module. Please note: You are NOT granted exemption from the particular examination for that Module. 21. The student member would be given a discount equivalent to the price of the module in respect of which exemption is availed. The concerned member is however will be required to pay the examination fee. 22. The candidate needs to be an under graduate in any discipline to be eligible for being a student member. However it is obligatory to become a graduate for obtaining CFP Certification. 23. The Certified Financial Planner program is being offered as a distance-learning curriculum with some optional classroom tutorials. However, the classroom tutorials will not be essential requirements for completing the program curriculum. A fully lecture based classroom program may be offered in the future. 24. The examinations will consist of multiple choice type questions. The examination for each module will be of 3 hrs. duration. Only the examination for Module 6 will be for 6 hrs. consisting of two parts of 3 hrs. duration each, on the same day. 25. Based on the overall performance and the level of difficulty of the exam, the pass marks would be in the range of 40 to 60 out of 100. In other words, all students scoring 60 marks or more would certainly pass the exam and any student scoring below 40 marks would fail the exam. However, certificates are granted to passing students accordingly to grading system of 'A, B and C' and individual marks are not diaplayed. 26. No, though work experience is not mandatory to register as a student member. One has the option of acquiring the experience while completing the education or subsequent to that. But the three years experience is mandatory for certification of planners by FPSB. 27. CAs, ICWAs specialize in handling the accounts, book keeping and audit of firms and corporates while the CSs deals with the secretarial matters relating to a corporate. A CFPCM certificant deals with the financial planning of an individual. The role of a CFPCM certificant is given in detail in our answer to question 2 above. Never the less, a Financial Planner is like a home physician who works closely with his clients and his sole concern is creation of wealth, proper tax planning, adequate protection of the client's interest so that his client's life goals are achieved. He is always a client's person and is not an agent of either any Insurance Company or a Mutual Fund etc. Therefore, his advice will be free from any extraneous influence. 28. For such a comprehensive world class course covering all the aspects of Financial Planning in great detail from 'Risk Management' to 'Tax Planning and Estate Planning' and all inclusive fees of Rs. 48,000 is quite reasonable. If one compares the expenditure of Rs.1.5 to 2 lacs that an MBA student has to incur, the fees charged by this course appears to be very much on the lower side. It is worthwhile to mention here that while the market is crowded with CAs, MBAs etc., there is a complete vacuum in the financial planning profession due to absence of qualified financial planners. Therefore, from the angle of career prospects, CFPCMcourse offers a much superior career option. | ||||||||||||||||||||||||||||
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