Module 1 – Foundations in Financial Planning

Standards

The standards expected for this Module is first year University/Tertiary education
level or as stated in the table below.

Expectations

Students are to be advised to read outside of the study guide as examinable questions
would be drawn from these recommended readings. The list of recommended reading
applicable for this module can be found at the end of this appendix.

Syllabus

Topic Title Remarks

1.1 The financial planning industry in
Singapore
The development of financial
planning in Singapore
Users of financial planning services
Providers of financial planning
services
The range of financial planning
services
The profile of a competent financial
planner
Why is needs analysis important?
Needs selling vs. product selling
1.2 Regulatory controls and practices
affecting financial planning
Monetary Authority of Singapore
Singapore Exchange
Various professional associations vis- A mention of the various professional
à-vis LIA, LUA, IMAS, GIA, SIBA, associations and how they impact the
FPAS etc. financial planning practice arena.
Also a mention of the various code of
ethics and professional standards
would be necessary. In this section
the licensing requirements must be
highlighted for different forms of
transactions.
Code of Professional Ethics
Licensing
1.3 The nature and scope of financial
planning

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 Definition of financial planning
Process of financial planning
Budget planning
Managing cash flow and basic assets
Risk management and insurance
planning
Investment planning
Tax and estate planning
Retirement / estate planning
The objectives of financial planning In this section, it should include:
The definition and process of
financial planning must strictly be the
definition of the CFP International
Board of Standards’ definition. There
must be no deviation from this
definition.
The CFP’s six steps financial
planning process and its relevant
definition must be reflected in this
section.
This section should cover cash and
credit management. Differentiation of
various types of loans and its various
methods of computation of
repayment schedule; e.g. mortgage;
car loans; etc. should be covered.
• Types of financial needs
• Cash needs
• Income needs
• Other financial needs
• Difficulties in identifying
financial needs
• Prioritizing needs
• Quantifying needs
• Main sources of money to
meet financial needs

Students should understand that to be competent financial planners, they must know
how to integrate different disciplines into a comprehensive plan. In order to do so,
they should develop skills and adhere to processes, including environmental analysis,
investment analysis, spreading of risks, in matching clients’ needs and objectives.

1.4 Analytical tools for financial planners

Understanding the time value of
money

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 Understanding and using business In this section a more in-depth study
statistics
Financial modeling with spreadsheets
Understanding personal financial In this section emphasis should be on
statements and ratios
Part The economic environment and its
2 effects on financial planning
2.1 The basic economic structure
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of basic statistical principles should
be included. This would include:
• Variance
• Standard deviation
• Coefficient of variation
• Mean, median and mode
• Normal/Abnormal distribution
• Sample sizes
• Theory of probability
• Interpretation of statistical
information
• Time series analysis
the interpretation of ratios.
In this section basic micro and macro
economic principles should be
included:
• Theory of Supply and demand
• Aggregate supply and demand
• Equilibrium – micro and
macro
• Elasticity
• Circular flow of a 4 sector
economy
• Business cycle
• Unemployment/full
employment in the economy
• Inflation/deflation
• Economic indicators
 The role of government
2.2 The economic environment
Economic growth
The business cycle
Inflation
Economic indicators
2.3 Government policy
National savings
Exchange rate policy
Fiscal policy and taxation
Monetary policy and interest rates
National wage policy
CPF and social security
Part Understanding company law
3 various business types are to be
This section should include:
• The big four goals of
government policies for
economic growth
• The supplementary six goals
of government policies for
economic growth
• Monetary and fiscal policies
• National savings
• Exchange rate policy
• Interest rate
• Demand and supply of money
in the economy
• National wages policy
• Measurement of economic
growth; GDP, GNP; income,
expenditure and output
approach
In this section, the structure of
defined:
• Sole proprietorship
• Partnership
• Private limited company
• Public listed company

Students are expected to understand

the legislation/responsibilities of
business owners/directors of
companies.
Part Risk management and Insurance
4 Planning
4.1 Categories of risk
Risk identification
Risk evaluation
4.2 The management of risk

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 Risk avoidance
Risk control
Risk financing
Risk transfer through insurance
4.3 The insurance industry Students should have a basic
The regulators understanding of the Insurance Act,
Professional bodies the key government departments and
The operators how the regulators monitor the sound
operation of the insurers. Students
should also understand how industry
and professional bodies attempt to
maintain the professional standards of
insurance agents and brokers. This
section should also include the areas
of practice in the non-life insurance
arena.
LIA Guidelines on needs based sales
process
Responsibilities of insurance advisors
Responsibilities of supervisors
Penalties for non-compliance
4.4 Product recommendation and Reference SCI’s Financial Need
presentation of recommendation Analysis Chapter 8
Product recommendations
Presenting the recommendations
4.5 Types of insurance cover
Life insurance
General insurance
Commercial insurance
4.6 Insurance Planning Case Study Reference SCI’s FNA Chapter 9
Case 1 – Young unmarried person
Case 2 – Young married person
Case 3 – Married with children
Part Investment Products and Analysis In the entire of Part 5, an
5 introductory level is expected.
5.1 Investments and Financial Markets
• Financial assets
• Financial markets
Risk and Return
• Risk-return trade off
• Measures of return
• Measure of risk
• Portfolio diversification
• Capital asset pricing model
and other asset pricing models

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 Financial Statement Analysis
• Major type of financial
statements
• Financial ratios: types and
uses
• DuPont system of analysis
• Comparative and trend
analysis
• Limitations of ratio analysis
Common Stock and Preferred Stock
Analysis
• Characteristics of common
stocks and equity securities
• Stock market indices
• Common stock valuation
• Preferred stock valuation
• Fundamental and technical
analysis
Economic Analysis
• Components of growth
• Economic indicators
• Monetary policy
• Fiscal policy
Industry Analysis
• Industry life cycle
• Competitive forces and
industry structures
• Business cycle analysis
Fundamental of fixed income
securities
• Characteristics of bonds
• Price quotations
• Special features of bonds
• High yield bonds
• Mortgaged backed securities
• Eurobonds
• Bond ratings
• Source of risks

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 Bond pricing, return measures and
interest rates
• Valuation of bonds
• Relationship between bond
price and required yield
• Relationship between coupon
rate, required yield and price
• Time path of a bond
• Yield measures
• Term structure of interest
rates
Futures, options, warrants and
convertibles
• Futures, options, warrants and
convertibles
• Mechanics of futures trading
• Use of futures contracts
• Option valuation and
strategies
• Attractions of options
Foreign exchange and swap contracts
• The foreign exchange market
• Foreign exchange rate
quotation
• Forward foreign exchange
contract
• Foreign exchange swap
• Swaps in capital markets
• Interest rate swaps
• Currency swaps
Unit trusts/managed funds
• Definition of unit trust
• Investment trusts
• Advantage of investing in unit
trusts
• Major types of funds
• Real estate investment trusts
• Charges and fees
• Bid and offer prices
• CPFIS – risk classification
system
• Evaluation of unit trusts
Investment management
• Managing portfolios
• Portfolio performance
evaluation
• Efficient markets
• Market psychology

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5.2 Futures products and analysis
Fundamentals of future contracts
• Characteristics of a futures
contract
• Types of futures contracts
• Futures vs. cash markets
• Contract specifications
• Participants in the futures
market
Trading strategies
• Speculating
- Scalper, day trader,
position trader
- Spread trader
- Inter-commodity and
inter-market spread
- Managing risk/reward
relationship
• Hedging
- Measuring risk
- Relationship between
cash and futures prices
- Convergence of basis
- Long and short hedge
- Developing an
effective hedge
programme
- Managing the hedge
• Arbitraging
- Cash and futures
arbitrage
- Yield curves
Forecasting techniques
• Fundamental analysis
• Technical analysis
• Statistical analysis
Options
• Fundamentals of options
pricing
• Types of option contracts
• Trading strategies
5.3 Unit trusts

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 Product knowledge of unit trusts
• Definition of unit trust
• Investment trusts
• Major types of funds
• Real estate investment trusts
(REITs)
• Charges and fees
• Bid and offer prices
• Evaluation of unit trusts
• Forward vs. historical pricing
Risk and Return
• Risk-return trade off
• Measures of return
• Measures of risk
• The required rate of return
Role of trustee
• Appointment of trustee
• Conditions for appointment
• Functions and responsibilities
of trustee
• Operational obligations of
trustee
Role of management company
• Appointment of management
company
• Conditions for appointment
• Functions and responsibilities
of management company
• Management of trust property
abroad
Central Provident Fund Investment
Scheme (CPFIS)
• Products approved under
CPFIS
• Risk classification system for
FMCs
• Criteria for FMCs to be
approved
• Investment guidelines
• Disclosure requirements
• Management of funds
• Restrictions and removal of
FMCs
• Auditors’ reports
• Half yearly returns to CPF
• Roles and responsibilities of
CPF approved FMCs
5.4 Financial Advisor’s Code of Conduct

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Part Income Tax Planning/Estate Duty
6
6.1 Basic Income tax concept
• Assessable income
• Taxable income
• Exempt income
• Deductions
• Rebates
6.2 Income tax planning
• Income splitting
• Income deferral
• Insurance premiums and
benefits
6.3 Supplementary Retirement Scheme –
a tax perspective
Part Retirement Planning and Estate
7 Planning
7.1 The retirement planning process
• Estimating the amount needed
during retirement
• Replacement ratio method
• Expense method
• Evaluating current resources
• CPF savings
• Non-CPF savings
• Formulating strategies for
filling retirement income
deficit
• Housing relocation
• Downgrading to a less
expensive home
• Cashing in while staying at
home
• Post retirement employment
• Maximizing annuities

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7.2 The CPF and SRS and their role in
retirement planning
• Central Provident Fund
• CPF Contribution
• CPF accounts
• Uses allowed for the money in
member’s CPF accounts
• CPF nomination
• The significance and main
purpose of CPF savings
• Other purposes for CPF
• The competing forces for the
CPF savings
• The adequacy of CPF savings
in meeting retirement income
needs
•
7.3 Supplementary Retirement Scheme
Comparison between SRS and CPF
7.4 Estate Planning
Definition of estate planning
Conservation of wealth at death
Distribution of wealth at death
Role of as estate planner
• Helping clients to decide how
and when the transferees
should receive the property
Techniques for preserving wealth
Lifetime gifts
Role of insurance agent in estate
planning
• Estate enhancement
• Estate liquidity
• S73 CLPA application to life
insurance
Part The basics of a financial plan
8
8.1 Understanding the client

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8.2 The data gathering process
• The basis of needs analysis
• What is fact finding?
• Why fact find?
• How to fact find?
• What are the skills required in
fact finding?
• What to ask?
• Application types
• Personal information
• Financial information
• Existing life insurance
policies
• Client objectives and
preferences
• Retirement needs
• Savings goals
• Completing the fact find
phase
8.3 Financial analysis of data Reference SCI’s FNA Chapter 6
• Seven areas of fact find to
focus on
• The client’s life stage
• The client’s employment
status and occupation
• Dependants
• Client’s financial position
• Existing life insurances
• Investment preferences
• Client’s objectives
• Assess whether client’s needs
are adequately met
8.4 Understanding strategies to meet
needs
8.5 Plan preparation
8.6 Plan implementation
8.7 The review process
• Professionalism and ethics
• Professional practices
• Execution-only transaction
• Disclosure of advisor’s status
• Preparing recommendations
for clients
• Presenting recommendations
for clients

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Reference Materials

Title Author Publisher Applicable

Modules for Use
Personal Financial Lawrence J Gitman The Dryden Press Module 1
Planning 8th Michael D Joehnk Harcourt Brace Module 3
Edition College Publishers Module 5
Financial Markets Tan Chwee Huat Singapore University Module 1
and Institutions in Press Module 4
Singapore
Financial McGrath M & McGraw Hill Book Module 1
Institutions, Vinney C Company Module 4
Instruments and
Markets, 2nd
Edition
Financial Jerry J Weygandt John Wiley and Sons Module 1
Accounting Module 4

Corporate Finance Bishop, Crabb, Faff Holt, Rinehart & Module 1

and Twaite Winston Module 4
Harcourt Brace &
Co. Australia
A Singapore Guide Andy Ong and Financial Module 1
to Personal Others Perspectives and
Financial Planning RMIT University
Fundamentals of Emmet J Vaughn John Wiley & Sons Module 1
Risk and Insurance Therese Vaughn Inc Module 2
8th Edition
Investments 5th Frank K Reilly The Dryden Press Module 1
Edition Edgar A Norton Harcourt Brace Module 4
College Publishers
Singapore Master CCH Asia Limited Module 1
Tax Guide (as Module 3
relevant)

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