CFC Philippines key terms

The structured six-step sequence a planner follows: establish the relationship, gather client data and goals, analyze the situation, develop recommendations, implement them, and monitor progress over time.

A written agreement defining the scope of advice, fees, responsibilities of both parties, and limits of the planner's authority, signed before substantive work begins.

The legal obligation to act solely in the client's best interest, placing the client's welfare above the planner's own compensation, affiliations, or convenience.

A lower threshold than fiduciary duty requiring only that a recommendation be reasonably appropriate for the client's objectives, risk tolerance, and financial circumstances.

The practice of informing clients in writing about commissions, referral fees, product ties, or other arrangements that could bias a recommendation, before the client decides.

The requirement to collect and document a client's goals, time horizon, income, obligations, tax position, liquidity needs, and tolerance for loss before advising.

A structured evaluation of how much investment volatility and potential loss a client can accept emotionally and financially, given income stability and upcoming obligations.

A record of money coming in and going out over a period, used to measure savings capacity, identify leaks, and fund goal contributions.

A snapshot listing assets at current value minus liabilities at outstanding balance, showing the client's financial position at a point in time.

Readily accessible cash set aside to cover living expenses during job loss, illness, or urgent repair, typically three to six months of essential spending.

Liquid assets divided by monthly essential expenses, indicating how many months a household could survive without new income.

Comparing planned spending with actual spending to explain differences and adjust future allocations, a core monitoring tool in ongoing planning.

The period until a goal's funds will be needed, which drives how much short-term volatility an investment plan can reasonably absorb.

Dividing a portfolio among asset classes such as equities, bonds, and cash to balance expected return against volatility, according to goals and risk capacity.

Spreading money across assets, sectors, issuers, and geographies so that any single loss has limited impact on the total portfolio.

Periodically buying and selling to restore a portfolio to its target weights after market movements have shifted the mix away from plan.

Market-wide risk such as interest rate shifts, inflation, or recession that diversification cannot remove, only manage through allocation choices.

A measure of how much a security's price tends to move relative to the broad market; above one indicates greater sensitivity than the market.

A statistical measure of how widely returns vary around their average, commonly used as a proxy for an investment's volatility and total risk.

The constant yearly rate that would take an investment from its starting value to its ending value over a given number of years.

The principle that money available today is worth more than the same amount later, because it can be invested and earn returns.

The amount a present sum or series of contributions will grow to after earning a stated rate for a stated number of periods.

Today's equivalent of a future sum or payment stream, found by discounting it at an appropriate rate over the relevant periods.

The rate used to convert future cash flows into today's value, reflecting the return available on comparable alternatives and the risk involved.

The general rise in prices over time that erodes purchasing power, meaning a fixed peso amount buys less in future years.

The return on an investment after subtracting inflation, showing the actual growth in purchasing power rather than in nominal pesos.

The systematic process of identifying exposures to loss, then avoiding, reducing, retaining, or transferring them at an acceptable cost.

A situation offering only the chance of loss or no loss, with no possibility of gain, such as fire, theft, disability, or premature death.

The amount the insured pays out of pocket before the insurer covers a claim, reducing premium in exchange for retaining small losses.

A cost-sharing arrangement in which the insured and insurer split covered costs in a stated proportion, common in health and property policies.

The present value of the income a person would have earned and contributed to dependents over their remaining working years, used to size life insurance needs.

Calculating life insurance coverage by totaling obligations such as debts, education, and income replacement, then subtracting existing resources and coverage.

The chance of death occurring earlier than expected, creating income loss for dependents and final expenses for survivors.

The shortfall between the projected cost of the desired retirement lifestyle and the projected income from savings, pensions, and government benefits.

The percentage of pre-retirement income needed in retirement to maintain a comparable standard of living, often estimated at seventy to eighty percent.

A contract paying a stream of income, either for a fixed period or for life, used to convert accumulated savings into retirement cash flow.

An employer-sponsored retirement plan promising a specified benefit at retirement, usually based on salary and years of service, with the employer bearing investment risk.

A retirement plan in which the employer contributes a set amount to an individual account, and the employee bears investment risk and receives whatever the account grows to.

The schedule by which an employee gains non-forfeitable ownership of employer contributions, often requiring a stated number of years of service.

The portion of gross income remaining after allowable deductions and exemptions, on which the graduated income tax rates are applied.

A range of taxable income subject to a specific marginal rate, with higher portions of income taxed at progressively higher rates.

The rate applied to the last peso of taxable income, relevant for judging the after-tax value of an additional deduction or contribution.

A deduction, exemption, or deferral that reduces tax payable, such as contributions to a qualified retirement account or interest on certain borrowings.

A tax on the profit from selling an asset above its cost basis, with rules varying by asset type and holding period.

The original purchase price of an asset plus allowable acquisition costs, used to compute gain or loss when the asset is sold.

A tax imposed on the transfer of a deceased person's net estate to heirs, computed after allowable deductions and exemptions.

The total value of all property a decedent owned or controlled at death, including real estate, accounts, business interests, and certain transfers.

A legal document directing how a person's property is distributed and who administers the estate, subject to probate and statutory limits.

The default statutory rules distributing an estate when the deceased left no valid will, based on family relationships.

The court-supervised process of validating a will, settling debts, and transferring estate assets to beneficiaries.

A legal arrangement in which a trustee holds and manages assets for beneficiaries according to the terms set by the person who created it.

Current assets minus current liabilities, measuring whether a business can meet short-term obligations from resources on hand.

A projection of expected cash receipts and payments over future periods, used to anticipate shortfalls and time financing needs.

Determining the sales level at which total revenue equals total fixed and variable costs, so the business neither profits nor loses.

A documented strategy for transferring ownership and management of a business on retirement, disability, or death, including buy-sell arrangements and funding.

Coverage on an essential employee or owner whose death or disability would impair the business, with the company as beneficiary.