PGDM 311017

PGDQF3110117

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CSL311017

National Institute of Securities Markets
Communiqué/Press Release
 
 
Certified Personal Financial Advisor (CPFA) Examination 
NISM/Certification/NMD-1/2010/1 dated December 28, 2010

National Institute of Securities Markets (NISM) and Financial Planning Corporation (India) Pvt. Ltd (FPCIL) announce the launch of Certified Personal Financial Advisor (CPFA) Examination for: 

  • Individual Financial Advisors
  • Employees of organizations engaged in financial advisory services
  • Employees of Asset Management Companies, Banks, Wealth Management companies especially persons engaged in financial advisory

The examination will be open to all.

The Certified Personal Financial Advisor (CPFA) Examination is offered jointly by NISM and FPCIL. The examination will be available to the candidates from 1st January 2011.

Details of Certified Personal Financial Advisor (CPFA) Examination are given in Annexure-I and Annexure-II attached to this communiqué/press release.

The text of these Annexures and the registration details are available at www.nism.ac.in.

 

-sd- 
M L SONEJI
Registrar
National Institute of Securities Markets

 

Enclosures: Annexure I and II


Annexure I – Syllabus Outline 
Certified Personal Financial Advisor (CPFA) Examination

 

Objective of the Examination

The examination seeks to create a common minimum knowledge benchmark for all persons involved in financial advisory including:

  • Individual Financial Advisors
  • Employees of organizations engaged in financial advisory services
  • Employees of Asset Management Companies, Banks, Wealth Management companies especially persons engaged in financial advisory

The certification aims to enhance the quality of financial advisory and related services in the financial services industry. 

Examination Specifications

This is a computer-based examination with multiple choice questions.
The examination consists of 60 questions of 1 mark each and 20 questions of 2 marks each adding to 100 marks.
The examination should be completed in 2 hours.
There shall be no negative marking.
The passing score for the examination is 60 marks.


Certified Personal Financial Advisor (CPFA) Examination 

Syllabus Outline with Weightages 

Unit 1

Concept of Financial Planning

4%

Unit 2

Managing Investment Risk

11%

Unit 3

Measuring Investment Returns

11%

Unit 4

Investment Vehicles

7%

Unit 5

Investment Strategies

12%

Unit 6

Insurance Planning

18%

Unit 7

Retirement Planning

18%

Unit 8

Tax and Estate Planning

16%

Unit 9

Need for Regulation

3%

 

 

 

 

 

 

 

 

 

 


Annexure II – Test Objectives 
Certified Personal Financial Advisor (CPFA) Examination

 

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

   2.1.1      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

   2.2.1      Define and calculate

                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

   3.1.1.    Describe the relationship between risk and return,

   3.1.2.    Understand  investors ability to take risk and willingness to take risk and identify optimal portfolioa llocation

3.2.  Define and understand how to apply the following:

   3.2.1.    Time value of money

   3.2.2.    Annuities and its types

   3.2.3.    EMI

   3.2.4.    Compounding

   3.2.5.    NPV

   3.2.6.    Inflation and tax adjusted interest rates

   3.2.7.    Holding period return

   3.2.8.    CAGR & IRR

3.3.  Distinguish between

   3.3.1.    Time weighted return Vs. money weighted return,

   3.3.2.    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

        Total returns

        Risk-adjusted returns

        Sharpe ratio

        Treynor Ratio

        Jensen’s Alpha

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, 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

   7.4.1.    Fundamental objective of greater efficiency in wealth transfer

   7.4.2.    Valuing of an Estate

   7.4.3.    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

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

       Structured Product

       Participating Notes

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 

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