CFC Philippines cheat sheet

Six-step planning process: establish and define the client relationship; collect client data and goals; analyze the client's current situation; develop the plan; implement the plan; monitor and update the plan.

Quantitative data are objective facts (income, assets, liabilities, ages, policy values); qualitative data are attitudes, risk tolerance, values, and expectations - both must be gathered before analysis.

Present value of an annuity due (payments at the start of each period) equals the ordinary annuity PV multiplied by (1 + i); use for beginning-of-period savings and lease payments.

Inflation-adjusted (real) return ≈ nominal return − inflation rate; exact form is (1 + nominal)/(1 + inflation) − 1.

Future value of a single sum: FV = PV × (1 + i)^n; solve for n with n = ln(FV/PV) ÷ ln(1 + i).

Rule of 72: approximate doubling time in years = 72 ÷ annual growth rate (percentage); useful for quick inflation and growth estimates.

A fiduciary standard requires acting in the client's best interest and disclosing conflicts; a suitability standard only requires a recommendation fit the client's profile.

The plan is a living document: monitoring triggers include changes in marital status, employment, health, tax law, and market or inflation shifts.

Risk-handling methods: avoidance, reduction (loss control), retention (planned or unplanned), sharing/transfer, and insurance transfer.

Insurable risk requires large numbers of similar exposure units, accidental and measurable loss, definite loss in time and amount, and no catastrophic correlation.

Life insurance needs: human-life-value method capitalizes future earnings; needs analysis (DIME-style) sums Debt, Income replacement, Mortgage, and Education costs, less existing resources.

Term insurance provides pure death benefit with no cash value; whole life and universal life build cash value, and universal life separates the cost of insurance from the cash-value account.

In the Philippines, the Insurance Commission regulates insurers; the Insurance Code requires insurable interest at inception (life) and at time of loss (property).

Indemnity principle: property insurance restores the insured to pre-loss financial position, not profit; valued policies and agreed-value clauses are exceptions.

Co-insurance (average) clause: claim = loss × (insurance carried ÷ insurance required), capped at the policy limit, where required = co-insurance % × value at risk.

Deductibles reduce premium and moral hazard; a higher deductible shifts small losses to retention.

Health and HMO plans commonly exclude pre-existing conditions during a waiting period; critical-illness riders pay a lump sum on diagnosis, not on medical bills.

Expected portfolio return = weighted average of asset expected returns; portfolio risk is not the weighted average when correlations are below +1.

Standard deviation measures total volatility; beta measures sensitivity to market movements (systematic risk); unsystematic risk is diversified away.

Capital Asset Pricing Model: required return = risk-free rate + beta × (market return − risk-free rate).

Sharpe ratio = (portfolio return − risk-free rate) ÷ standard deviation; higher is better on a risk-adjusted basis.

Asset allocation explains most return variability; rebalancing restores target weights and enforces a sell-high/buy-low discipline.

Duration approximates bond price sensitivity: a 1% change in yield changes price by about duration percent (inverse direction).

Real return ≈ nominal return − inflation; nominal return ≈ (1 + real)(1 + inflation) − 1.

Time-weighted return removes the effect of cash flows and measures manager performance; money-weighted return (IRR) reflects the investor's actual experience.

Philippine context: PDEx-traded fixed-income securities, PSE-listed equities, government securities, UITF and mutual fund vehicles; the BSP sets monetary policy affecting rates.

Replacement ratio: target retirement income as a percentage of pre-retirement income; commonly 70–80%, adjusted for expected expense changes.

Capital needs method: required lump sum = annual retirement shortfall ÷ real return, or use PV of an inflation-adjusted annuity for a finite horizon.

Annuity due (payments at start of period) is appropriate for retirement income drawn at the beginning of each period; multiply ordinary PV by (1 + i).

SSS pension (Philippines): monthly pension based on credited years of service, average monthly salary credit, and the number of dependent children (limited to five).

GSIS covers government employees; Pag-IBIG (HDMF) covers housing loans, provident savings, and retirement withdrawals for members.

Under RA 7641 (Philippines), retiring employees with at least five years of service are entitled to retirement pay of at least one-half month's salary per year of service, with a minimum of one month's salary.

Defined benefit plans promise a formula-based benefit (often final pay × years × accrual rate); defined contribution plans provide whatever the account accumulates.

Vesting schedules determine when employer contributions belong to the employee; cliff vesting and graded vesting are common designs.

Early retirement reduces accumulation years and increases drawdown years; delaying retirement by a few years can materially raise sustainable income.

Philippines TRAIN law individual income tax: 0% on annual taxable income up to PHP 250,000; 15% on the excess over 250,000 up to 400,000; 20% over 400,000 to 800,000; 25% over 800,000 to 2,000,000; 30% over 2,000,000 to 8,000,000; 35% above 8,000,000.

Taxable income = gross income − allowable deductions; deductions may be itemized (optional standard deduction is 40% of gross sales/receipts for individuals).

Capital gains on sale of unlisted shares of domestic corporations: 15% final tax on net capital gain; sale of listed shares through the exchange: 0.6% stock transaction tax.

Sale of real property classified as capital asset: 6% final capital gains tax on gross selling price or zonal value, whichever is higher.

Estate tax in the Philippines: 6% flat on the net estate (TRAIN), with a standard deduction of PHP 5,000,000 for resident decedents.

Donor's tax: 6% flat on net gifts exceeding PHP 250,000 per year for each donor.

Tax deferral and tax-exempt vehicles (e.g., certain retirement and life insurance proceeds) can improve after-tax compounding; tax-exempt income yields a higher after-tax equivalent.

Taxable-equivalent yield = tax-exempt yield ÷ (1 − marginal tax rate) for comparing exempt and taxable bonds.

Documentation matters: BIR Form 2316, official receipts, and certificate of creditable tax withheld support deductions and credits.

Estate planning tools: will (testamentary), intestate succession rules, trusts, life insurance, joint accounts, and lifetime gifts.

In the Philippines, the legitime reserves a portion of the estate for compulsory heirs: legitimate children receive one-half of the estate, divided equally; the surviving spouse and legitimate parents have their own legitimes.

Free portion is the remainder of the estate after legitimes; the testator can dispose of it by will.

Estate tax base: gross estate (real and personal property, including taxable transfers) less deductions (standard PHP 5,000,000, family home up to PHP 10,000,000, and other allowed deductions).

Life insurance proceeds are generally included in the gross estate when the decedent is the owner or the beneficiary is the estate; naming a third-party beneficiary can remove proceeds from the estate.

Gift and estate taxes are complementary: lifetime gifts reduce the estate but consume the donor's tax exemption; donor's tax is 6% over PHP 250,000 net gifts per year.

Intestate succession order (Philippines): legitimate children and descendants; legitimate parents and ascendants; surviving spouse; collateral relatives; the State.

Probate validates the will; without a will, the estate is distributed under the Civil Code's intestate rules.

Estate liquidity planning matches cash needs (taxes, debts, expenses) with liquid assets or insurance so heirs need not sell illiquid property.

Net worth = total assets − total liabilities; cash flow surplus = income − expenses; a negative surplus means drawing down assets or borrowing.

Emergency fund target: 3–6 months of essential expenses (longer for variable or single incomes).

Budgeting methods: 50/30/20 (needs/wants/savings), zero-based budgeting, and envelope budgeting; each allocates every peso to a purpose.

Debt management: compare effective annual rates; prioritize highest-rate debt (avalanche) or smallest balance (snowball); avoid minimum-payment-only revolving balances.

Credit card finance charges are typically computed on the unpaid balance using a monthly rate; paying in full within the grace period avoids interest.

Savings rate = savings ÷ gross income; raising it shortens the time to reach a financial goal more reliably than chasing higher returns.

Goal funding: required periodic saving = FV goal ÷ future value annuity factor for the chosen rate and period.

Liquidity, safety, and return trade off; keep short-term goals in low-volatility instruments and long-term goals in growth assets.

Record-keeping and net-worth statements should be reviewed at least annually or after major life events.

Working capital = current assets − current liabilities; the current ratio = current assets ÷ current liabilities measures short-term solvency.

Quick (acid-test) ratio = (current assets − inventory) ÷ current liabilities; excludes less liquid inventory.

Break-even point in units = fixed costs ÷ (price − variable cost per unit); in pesos = fixed costs ÷ contribution margin ratio.

Time value of money governs capital budgeting: NPV = PV of cash inflows − initial outlay; accept projects with positive NPV.

IRR is the discount rate making NPV zero; accept when IRR exceeds the cost of capital, but IRR can mislead with non-conventional cash flows.

Business insurance: property, business interruption, general liability, and key-person life insurance protect continuity; buy-sell agreements fund ownership transfers.

Business succession: buy-sell agreements (cross-purchase or entity-redemption) set valuation and funding mechanisms for a departing owner.

Entity choice affects taxation and liability: sole proprietorship, partnership, and corporation differ in personal liability and tax treatment; the SEC registers corporations in the Philippines.

Owner compensation planning: balancing salary (deductible to the business, taxable to the owner) and dividends/withdrawals affects total tax.

Fiduciary duty comprises loyalty (client's interest first), care (competence and diligence), and disclosure of material conflicts.

Informed consent requires explaining the recommendation, alternatives, costs, and risks in terms the client understands.

Confidentiality: client information may be shared only with consent or as required by law; need-to-know applies within a firm.

Suitability requires matching recommendations to the client's objectives, time horizon, risk tolerance, and financial capacity.

Fee and compensation disclosure must be clear and complete; undisclosed commissions or referral fees are conflicts of interest.

Know-your-client and anti-money-laundering rules (Philippines AMLA) require customer identification, record-keeping, and suspicious transaction reporting.

Professional competence: decline or refer work outside your expertise; document the basis for recommendations.

Fair dealing: no front-running, market manipulation, or preferential treatment of select clients; allocate investment opportunities fairly.

Review and monitoring are ethical obligations, not optional services; changes in client circumstances require reassessment.