Financial Planning, Ethics, and Professional Practice
What this domain tests
Financial Planning, Ethics, and Professional Practice tests whether you can run a structured planning conversation and act professionally when a sale is at stake. Questions mix needs analysis, product suitability and ethical judgment.
Core rules
- Planning steps: establish the relationship, gather data, analyze, develop recommendations, implement, monitor and review.
- Needs approach: cover = debts + education + income replacement + final expenses − existing assets and insurance.
- Human life value capitalizes expected future earnings; useful for income replacement but sensitive to assumptions.
- Protection comes before investment: emergency fund, health cover, disability, then life insurance.
- Ethics: integrity, objectivity, competence, confidentiality, fairness and suitability; disclose commissions and conflicts.
- Replacement of an existing policy must be justified in the client's interest, with comparison and disclosure.
Worked example
A 38-year-old breadwinner earns PHP 1.2 million a year, has PHP 2 million in debt, wants PHP 3 million for children's education and PHP 500,000 for final expenses, and holds PHP 1.5 million in assets plus PHP 1 million of group life. Using 5× income replacement: need = 2 + 3 + 0.5 + 6 = PHP 11.5 million; resources = PHP 2.5 million; gap = PHP 9 million. Reasoning: the gap is cover, not a product. A 20-year term policy plus a small permanent policy may fit the budget; recommending an expensive investment-linked plan that the client lapses in year three fails suitability.
Traps that cost marks
- Presenting insurance as an investment with guaranteed returns.
- Recommending replacement without comparing costs and surrender losses.
- Using fear or "buy now" pressure instead of documented needs.
- Sharing confidential client data to close a referral.