Certified Personal Financial Advisor (CPFA) for Examination

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1 NATIONAL INSTITUTE OF SECURITIES MARKETS Certified Personal Financial Advisor (CPFA) for Examination Test Objectives 1. Concept of Financial Planning 1.1 Understand what financial planning constitutes 1.2 Know the need for financial advisory services 1.3 Understand the scope of financial advisory services 1.4 Describe the financial planning delivery process 1.5 Understand client s situation and goals 1.6 Understand importance of assessing client s investment risk profile 1.7 Understand importance of assessing client needs 1.8 Understand parameters for recommending investment strategy 1.9 Know how to implement the advice with right products 1.10 Understand the importance of monitoring & reviewing periodically 2. Managing Investment Risk 2.1 Know different types of risk Define Market Risk (Systematic and Unsystematic) Reinvestment risk Interest rate risk Purchasing power risk Liquidity risk Political risk Exchange rate risk Inflation risk Tax Rate risk Alpha 2.2 Understand how to measure risk Certified Personal Financial Advisor Examination Page 1 of 6

2 2.2.1 Define and calculate NATIONAL INSTITUTE OF SECURITIES MARKETS Standard deviation Beta including portfolio beta Variance, semi-variance and covariance Coefficient of variation and correlation Probability Mean Median Mode 2.3 Understand how to manage risk Diversification and hedging Types Product Time Diversifiable and un-diversifiable risk 3. Measuring Investment Returns 3.1. Understand risk, return and investor outlook Describe the relationship between risk and return, Understand investors ability to take risk and willingness to take risk and identify optimal portfolio allocation 3.2. Define and understand how to apply the following: Time value of money Annuities and its types EMI Compounding NPV Inflation and tax adjusted interest rates Holding period return CAGR & IRR 3.3. Distinguish between Time weighted return Vs. money weighted return, Real(Inflation adjusted) rate of return vs. nominal return, 3.4. Know how to assess mutual fund performance using benchmark and peer performance 3.5. Calculate Certified Personal Financial Advisor Examination Page 2 of 6

3 Total returns Risk-adjusted returns Sharpe ratio Treynor Ratio Jensen s Alpha NATIONAL INSTITUTE OF SECURITIES MARKETS 3.6. Discuss Capital Gains, Types i.e. STCG and LTCG and taxation 4. Investment strategies 4.1. Explain Active and Passive strategies (Asset allocation across risky and risk-free portfolios, cross border diversification, market timing, securities selection, maturity selection, buy/hold) 4.2. Discuss asset allocation (Strategic asset allocation, application of client lifecycle analysis, client risk tolerance measurement and application, asset class definition and correlation, tactical asset allocation, fixed and flexible allocation, rebalancing strategies, formulae based monitoring and revision of portfolios) 5. Insurance Planning 5.1. Understand objective of risk management, law of large numbers 5.2. Describe personal risk management, risk control and risk financing, 5.3. Name categories of insurance, features: Insurance of Assets Insurance of Liabilities Term Insurance Health Insurance 5.4. Explain life insurance needs analysis (Human life approach, Needs approach, Multiple Approach, Capital needs analysis approach) 5.5. List types of life and health insurance products and their features (single payment/ multiple payment, money back policies 6. Retirement Planning 6.1. Detail Retirement Planning Process (Financial need analysis, determining needs, replacement ratio and expense methods, future value, shortfall in retirement funding, Certified Personal Financial Advisor Examination Page 3 of 6

4 NATIONAL INSTITUTE OF SECURITIES MARKETS Inflation-adjusted discount rates and nominal return on investment, retirement products like PF, gratuity etc 6.2. Describe annuities, its types, pension plans, NPS 6.3. Explain shifts in asset allocation before and during retirement as part of overall retirement plan 6.4. Explain the concept of reverse mortgage and features of available products 7. Tax and Estate Planning 7.1. Heads of Income: gross total income, adjusted gross income, itemized deductions, taxable income, tax liability, clubbing of income, taxation for NRIs, capital gains tax rules, 7.2. Characterization of gain or loss, netting rules, indexation benefits, capital loss limitations, tax planning strategies (tax relief, exemptions, deductions, rebates) 7.3. Discuss Wealth Tax Act and its implication for clients 7.4. Describe Estate Planning Fundamental objective of greater efficiency in wealth transfer Valuing of an Estate Hindu and Indian Succession Act, wills, probates, transfers through trusts and contracts, Powers of Attorney, mutation, succession. 8. Investment Vehicles 8.1. Name and Describe Small Savings Instruments like Public Provident Fund National Saving Certificate Kisan Vikas Patra Post Office Monthly Income Scheme Post office Term Deposit Post Office Saving Accounts Senior Citizen Saving Scheme 8.2. Name and Describe Fixed Income Instruments like Government Securities (Bonds, T-Bills, COD, CP, Zero Coupon Bonds, PN, etc.), Corporate Securities (Corporate Bonds, Debentures, etc.) Corporate Deposits Bank Deposits Certified Personal Financial Advisor Examination Page 4 of 6

5 NATIONAL INSTITUTE OF SECURITIES MARKETS 8.3. Name and Describe Mutual Fund Products like Generic Equity Growth Funds Income Funds Balanced Funds Liquid Funds Specific Index Funds ETFs Thematic & Sectoral Funds FMPs Arbitrage Funds Overseas opportunities Short-term Funds for parking liquidity diversified equity fund 8.4. Define Equity shares & its types Dividend Yield EPS P/E 8.5. Define Modes of valuation Portfolio management aspects Value growth investing 8.6. Define derivatives and commodities - essential features, types-future and Options (F&O) 8.7. Define real estate - forms of real estate investment, financing real estate, costs of buying and maintaining, loans and financing 8.8. Name and Describe other investments ULIPs Bullion Collectibles Precious metals Venture Capital Private Equity Certified Personal Financial Advisor Examination Page 5 of 6

6 Structured Product Participating Notes NATIONAL INSTITUTE OF SECURITIES MARKETS 9. Regulatory Environment and Ethical Issues 9.1 Explain need for regulation, regulation and investor protection 9.2 Describe overall framework of the regulatory system Government Regulation Self Regulation Interface with the Judicial System 9.3 Explain role of the Ministry of Finance (MOF); Ministry of Company Affairs (MCA); 9.4 Explain roles of regulators: SEBI, RBI, IRDA, PFRDA 9.5 Discuss key acts and regulations: SEBI Act IRDA Act SCRA and SCR Rules Companies Act Contract Act PMLA FEMA 9.6 Discuss ethical issues in providing financial advice 9.7 Detail codes of conduct by SEBI, IRDA, professional bodies 9.8 Describe investor complaint redressal mechanism Certified Personal Financial Advisor Examination Page 6 of 6

NASAA Investment Adviser Competency Exam (Series 65) Exam Specifications and Outline (Effective 1/1/2010)

NASAA Investment Adviser Competency Exam (Series 65) Exam Specifications and Outline (Effective 1/1/2010) CONTENT AREA # of Items 1. Economic Factors and Business Information 19 (14%) A. Basic economic