CFP Hong Kong cheat sheet

Emergency fund target: 3–6 months of essential expenses; use 6–12 months for single-income households, variable commission income, or self-employment.

Life insurance need via capital retention: need = income replacement + debts + education + final expenses − existing liquid assets − existing cover.

Human life value = present value of future net earnings (gross income less self-maintenance and taxes) discounted at a risk-adjusted rate to the insured's retirement age.

MPF offsetting: employer's mandatory and voluntary contributions may be used to offset severance/long service payment; employee's own contributions may not be offset.

Critical illness cover should be sized to 3–5 years of income plus outstanding mortgage, because survival often brings income loss and non-covered rehabilitation costs.

Disability income benefit is capped in practice at 60–70% of pre-disability income; indemnity policies reimburse actual expenses, benefit policies pay a fixed sum.

Underwriting principle of utmost good faith: the applicant must disclose material facts; non-disclosure allows the insurer to avoid the contract within the contestability period (commonly 2 years).

Deductible and co-insurance trade-off: raising the deductible lowers premium but increases retained loss; co-insurance splits each loss between insurer and insured in a fixed proportion.

Premium mode factor: paying annually is cheapest; monthly mode typically adds 5–8% because of lost investment income and administrative cost.

Real return ≈ (1 + nominal return) / (1 + inflation) − 1; never subtract inflation from nominal return when the gap is large.

Sharpe ratio = (Rp − Rf) / σp; it measures excess return per unit of total risk and is appropriate for a fully diversified portfolio.

CAPM: E(Ri) = Rf + βi × (E(Rm) − Rf); beta measures systematic risk only, so unsystematic risk earns no premium.

Bond price and yield move inversely; for a given change in yield, duration overstates price increase and understates price decrease (convexity).

Duration approximates percentage price change for a 1% yield change; modified duration = Macaulay duration / (1 + y/m).

Markowitz efficient frontier: portfolios on the frontier offer the highest expected return for each level of risk; adding low-correlation assets shifts the frontier up and left.

SAA vs TAA: strategic asset allocation sets long-term policy weights and explains most return variability; tactical asset allocation makes short-term deviations within policy limits.

Hang Seng Index is a free-float-adjusted market-capitalisation index; stock Connect links HK and mainland exchanges with daily quota limits.

SFC-authorised funds may be marketed to the Hong Kong public; unauthorised funds are restricted to professional investors (portfolio ≥ HK$8 million).

MPF contribution: employee 5% of relevant income, employer 5%; minimum relevant income HK$7,100/month, maximum relevant income HK$30,000/month (cap HK$1,500 each per month).

MPF preservation: accrued benefits must be preserved until age 65; early withdrawal is allowed only on permanent departure, total incapacity, terminal illness, or death.

Voluntary contributions (TVC) to MPF attract tax deduction up to HK$60,000 per year, separate from the HK$60,000 mandatory contribution deduction.

Retirement replacement ratio = retirement income / pre-retirement income; a common planning target is 70–80% for middle-income retirees.

Capital needed at retirement = annual retirement spending gap × annuity factor for the expected retirement duration at the assumed real return.

Annuity factor (ordinary) = [1 − (1 + r)^−n] / r; use an annuity-due factor if withdrawals occur at the start of each period.

ORSO schemes are occupational retirement schemes; benefits vest after 10 years of service, and MPF-exempt ORSO schemes must meet minimum standards.

Longevity risk: planning to average life expectancy leaves a 50% chance of outliving assets; plan to age 90–95 or use annuitisation for the tail.

Severance payment and long service payment are statutory; calculate on years of service × 2/3 of last month's wages (capped at HK$22,500), subject to MPF offsetting.

Hong Kong salaries tax is progressive on net chargeable income: 2%, 6%, 10%, 14%, 17%, with a standard rate of 15% on net total income; tax payable is the lower of the two.

Basic allowance HK$132,000; married person's allowance HK$264,000 (2023/24 onwards).

MPF mandatory contributions are deductible up to HK$18,000 per year; TVC adds up to HK$60,000.

Home loan interest deduction: up to HK$100,000 per year for 20 years of assessment, for a home occupied as principal residence.

Territorial principle: Hong Kong taxes profits, salaries, and property arising in or derived from Hong Kong; offshore profits may be non-taxable but require substantiation.

Two-tiered profits tax: 8.25% on first HK$2 million of assessable profits, 16.5% thereafter; only one connected entity may elect the two-tiered rates.

Personal assessment aggregates income and allows deduction of mortgage interest and charitable donations; beneficial when property or business losses exist.

Charitable donations are deductible up to 35% of adjusted assessable income, with a minimum aggregate of HK$100.

No capital gains tax, no inheritance tax, no VAT/GST, and no tax on dividends in Hong Kong.

Hong Kong abolished estate duty in 2006; planning now focuses on probate efficiency, asset protection, and mainland/foreign situs assets.

Intestacy: without a will, the estate is distributed by statute; a surviving spouse with children receives the personal chattels plus a statutory legacy, with the residue split between spouse and children.

A will must be in writing, signed by the testator, and witnessed by two witnesses present at the same time; a beneficiary cannot be a witness.

Trust structures: a discretionary trust separates legal and beneficial ownership, avoids probate, and allows flexible distribution; a fixed trust gives beneficiaries defined entitlements.

Probate is the court's confirmation of the executor's authority; assets held jointly or in trust generally pass outside probate.

Lifetime gifts: outright gifts remove assets from the estate but may trigger stamp duty on property transfers and lose control; gift-with-reservation issues apply in some jurisdictions.

Cross-border succession: mainland property is governed by the law of the place of the asset (lex situs) for immovables; a Hong Kong will may need separate mainland notarisation.

Enduring power of attorney covers property and financial affairs if the donor loses mental capacity; it must be registered and cannot be used until capacity is lost.

Stamp duty on residential property transfers ranges from HK$100 to 4.25% (AVD Scale 2), with higher rates for non-permanent residents and short-held properties.

Fiduciary duty: act in the client's best interest, disclose all conflicts, and avoid self-dealing; suitability must be assessed before any recommendation.

Know-your-client data: financial situation, investment experience, risk tolerance, time horizon, liquidity needs, and objectives must be documented.

Six-step financial planning process: establish relationship, gather data, analyse, develop recommendations, implement, monitor and review.

CFP Code of Ethics principles: integrity, objectivity, competence, fairness, confidentiality, professionalism, and diligence.

SFC suitability requirement: a recommendation must be reasonably suitable for the client given their circumstances; solicitation without suitability assessment breaches the rule.

Confidentiality: client information may be disclosed only with consent or where required by law; it survives the end of the engagement.

Conflict of interest: disclose commission, referral fees, and soft dollars in writing before the client acts; obtain informed consent.

Record keeping: retain client files and recommendations for at least 7 years under SFC and IA requirements.

Continuing education: CFP certificants must complete 30 hours of CE per two-year cycle, including at least 2 hours of ethics.