RFP Philippines common mistakes
RFP Philippines · Understand the traps and how to avoid them.
Computing a client's emergency fund or debt-service ratio using gross income instead of take-home (net) income, or mixing monthly and annual figures in the same ratio.
Candidates skim the case facts, grab the salary figure first, and default to gross because it is the most visible number. The RFP case studies often give both an annual gross salary and a monthly net pay, and the time pressure pushes candidates toward the first number they see without checking which basis the question asks for.
What to do instead
Before calculating, write in the margin: 'basis = net monthly' or 'basis = gross annual' as stated in the question stem. Convert every figure to the same period (divide annual by 12) and label units. For debt-service and emergency-fund questions, default to net take-home unless the item explicitly says gross, then sanity-check the answer (e.g., a 6-month fund should be roughly half of annual net income, not annual gross).
Treating the estate tax as applying to the entire gross estate rather than to the net taxable estate after deductions (standard deduction, family home, funeral and medical expenses, and the share of the surviving spouse).
The Philippine estate tax computation has a specific ordering: gross estate, then ordinary deductions, then special deductions, then the share of the surviving spouse, then the tax rate on the net. Candidates who memorized '6% of the estate' skip the deduction ladder and overstate the tax, or apply the wrong rate because they confuse the estate tax with the donor's tax or with the old graduated schedule.
What to do instead
Build a fixed worksheet every time: Gross estate (all properties at fair market value at death) minus ordinary deductions (funeral, judicial/admin, debts, claims against the estate, unpaid taxes, bequests to government) minus special deductions (standard deduction, family home up to the cap, medical expenses, retirement benefits under the exemption) minus the surviving spouse's share, then apply the flat rate to the net. Practise the full ladder on three sample estates before exam day.
Confusing the donor's tax with the estate tax and applying the wrong exemption or rate to a lifetime gift, especially for gifts to strangers or to relatives other than the spouse or descendants.
Both are transfer taxes, and reviewers often study them back-to-back, so the exemption thresholds and the treatment of 'stranger' donees blur together. Candidates also forget that the donor's tax is generally a tax on the donor and that certain gifts (e.g., to the spouse, or small exempt gifts) are excluded.
What to do instead
Make a two-column comparison card: estate tax (imposed on transfer at death, flat rate on net estate after the deduction ladder) versus donor's tax (imposed on lifetime gratuitous transfers, with its own exemption and a higher rate for gifts to strangers). For each practice item, first ask 'is this at death or during life?' and 'who is the donee?', then pick the regime before touching numbers.
Applying a single 'safe' withdrawal rate or a single inflation assumption to every retirement projection, ignoring the client's actual asset mix, time horizon, and the Philippine inflation and return environment.
Candidates memorize one rule of thumb from review notes and apply it mechanically because building a proper projection takes time. They also forget to state assumptions, so a projection built on an unstated 8% return looks correct in isolation but is inconsistent with the investment plan described in the same case.
What to do instead
For every retirement question, write down four assumptions before calculating: current age and retirement age, expected return by asset class, inflation rate, and post-retirement horizon. Show the accumulation phase and the drawdown phase separately, and state the withdrawal rate you are testing. If the question asks for a required annual savings figure, solve for the contribution rather than guessing a rate.
Ignoring the time value of money when comparing investment or insurance options, and comparing a lump sum with a stream of payments at face value.
The exam frequently presents two options (e.g., take a lump sum now versus receive payments over years, or pay premiums annually versus quarterly) and candidates add the nominal amounts instead of discounting. This happens because the arithmetic is simple and the TVM step feels optional under time pressure.
What to do instead
Whenever two options differ in timing, immediately set up a timeline and discount to a common date using the stated rate. Use the calculator's cash-flow or annuity functions rather than manual sums. State the comparison date in your answer so the marker can see the method, and check that the chosen rate matches the risk of the cash flows.
Recommending an investment product before completing the client data-gathering and risk-profiling steps, or recommending a product that contradicts the client's stated risk tolerance, time horizon, or liquidity needs.
Candidates want to demonstrate product knowledge and jump to the recommendation, treating the process questions as soft. In ethics and practice items, this is exactly the behaviour being tested, and in investment planning items it produces a technically correct product attached to the wrong client.
What to do instead
For any recommendation item, first restate the client's objectives, constraints (liquidity, time horizon, tax situation, legal/regulatory), and risk profile in one line. Then test the proposed product against each constraint and reject it explicitly if it fails one. In process questions, identify which step of the financial planning process the scenario sits in before choosing an answer.
Treating the insurance need as a single lump-sum death benefit without distinguishing life insurance from health, disability, and property cover, and without checking exclusions, waiting periods, and the free-look period.
Candidates conflate 'insurance planning' with 'buy life insurance' and answer needs-analysis questions with a death-benefit figure when the question is about morbidity, disability income, or long-term care. Policy-feature questions are missed because candidates study product types but not the contractual conditions that determine whether a claim is paid.
What to do instead
Classify the risk first: premature death, disability, critical illness, hospitalization, property/liability, or longevity. Match the product class to the risk, then compute the need with the appropriate method (e.g., human life value or needs approach for death; income replacement percentage for disability). Separately memorize the key contractual features: incontestability, free-look, waiting period, pre-existing condition exclusion, and reinstatement.
Calculating taxable income without applying the personal and additional exemptions, the optional standard deduction versus itemized deduction choice, and the correct treatment of 13th-month pay and other de minimis benefits.
The Philippine income tax rules have several thresholds and elections that change the answer, and candidates under time pressure apply the graduated table to gross compensation income. They also forget that certain bonuses and de minimis benefits are exempt up to statutory caps, and that the choice between optional standard deduction and itemized deductions is an election with consequences.
What to do instead
Build a standard computation template: gross compensation/business income, less exemptions, less the chosen deduction (compare OSD against itemized and pick the lower tax), then apply the graduated schedule. Keep a one-page list of exempt items and their caps (13th-month pay and other benefits, de minimis allowances, certain retirement benefits) and check each income item against it before adding it to the taxable base.
Ignoring the employer's contribution and vesting rules when valuing an employee benefit, and treating the entire retirement fund balance as the employee's own money.
Candidates value a pension or provident fund by its total balance without separating employee and employer shares, and without applying the vesting schedule or the tax treatment on withdrawal. This produces an overstated retirement asset and an understated tax liability in the same answer.
What to do instead
For every employee-benefit item, split the balance into employee contributions, employer contributions, and investment earnings. Apply the vesting schedule to the employer portion, then apply the tax rule to the amount actually received. If the question involves separation or retirement, check whether the benefit qualifies for exemption and state the condition.
Answering ethics and practice-management items by choosing the option that best serves the client's interest in the short term, rather than the option that follows the disclosure, consent, and documentation requirements.
Candidates read ethics questions as 'be a good person' questions, so they pick the empathetic answer. The exam tests process: disclose conflicts in writing, obtain informed consent, keep records, refer when outside competence, and follow the regulator's rules even when the client would prefer otherwise.
What to do instead
For every ethics item, identify the specific duty in play (competence, confidentiality, conflict of interest, fair dealing, disclosure, record-keeping) and choose the answer that satisfies the procedural requirement, not just the outcome. Where two answers both seem ethical, pick the one that involves written disclosure, client consent, and documentation, and be able to name the rule or standard that supports it.