RFP Philippines flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Six-step planning process

Establish engagement, gather data and goals, analyze, develop recommendations, present and implement, then monitor. Each step produces documentation that supports the next and the review cycle.

Engagement letter

A written agreement defining scope, fees, responsibilities, and term of the engagement. It should be signed before advice is given and updated when scope changes.

Qualitative vs quantitative data

Quantitative data are measurable facts such as income, assets, and liabilities. Qualitative data cover goals, attitudes, risk tolerance, and health, which shape how numbers are used.

Insurable interest

A financial or legal relationship such that the beneficiary suffers loss if the insured dies. It must exist at policy inception for a third-party beneficiary.

Incontestability clause

After the policy has been in force for the statutory period, generally two years, the insurer cannot contest it for misrepresentation, except for fraud or non-payment.

Non-forfeiture options

On lapse of a cash-value policy, the owner may take cash surrender value, reduced paid-up insurance, or extended term insurance, preserving some value.

Human life value method

Estimates insurance need as the present value of the insured's future earnings available to dependents, net of personal consumption and taxes.

Risk treatment options

Avoid, reduce, retain, or transfer a risk exposure. Selection depends on frequency, severity, cost of transfer, and the client's capacity to absorb loss.

Real return

The return after inflation, computed exactly as (1 + nominal)/(1 + inflation) - 1. It measures change in purchasing power, not nominal growth.

Systematic vs unsystematic risk

Systematic risk is market-wide and cannot be diversified away. Unsystematic risk is firm-specific and is reduced by holding many securities.

Asset allocation

The split of a portfolio among equity, fixed income, and cash. It is the primary determinant of long-run portfolio volatility and return.

Time-weighted return

A return measure that removes the effect of external cash flows, used to judge manager performance. Money-weighted return reflects the investor's actual timing.

Investment policy statement

A written document setting objectives, risk tolerance, constraints, target allocation, and rebalancing rules. It guides decisions and limits emotional trading.

Retirement funding gap

Projected annual retirement expense minus expected recurring income, capitalized to a lump sum at the retirement date. The gap is what savings must cover.

Replacement ratio

Required retirement income expressed as a percentage of pre-retirement income. It is a quick estimate that ignores individual spending patterns.

Sequence-of-returns risk

Poor investment returns early in the withdrawal phase deplete capital faster than the same average return earned later. It matters most near retirement.

Longevity risk

The risk that a client outlives their assets. It is managed by annuitizing part of the portfolio, delaying retirement, or using a conservative withdrawal rate.

PERA

The Personal Equity and Retirement Account, a voluntary retirement vehicle with tax incentives and an annual contribution cap set by regulation.

Residence-based taxation

Philippine citizens and residents are taxed on worldwide income. Non-resident aliens are taxed only on income sourced within the Philippines.

Eight percent flat tax

An option for self-employed and professional taxpayers with gross receipts below the VAT threshold, replacing graduated income tax and percentage tax on gross receipts.

Estate tax

A transfer tax on the net estate, computed as gross estate less deductions, at the rate set by the Tax Code as amended by TRAIN.

Tax avoidance vs evasion

Avoidance uses legal means within the statute to reduce tax. Evasion is illegal and involves concealment, false reporting, or failure to report taxable income.

Legitime

The portion of the estate reserved by law for compulsory heirs. The free portion may be disposed of by will, subject to the limits of the Civil Code.

Compulsory heirs

Heirs entitled by law to a share of the estate, including legitimate children and descendants, the surviving spouse, and legitimate ascendants in the prescribed order.

Intestate succession

Distribution when there is no valid will. The order runs from descendants to ascendants, spouse, collateral relatives, and finally the State.

Life insurance beneficiary designation

Proceeds pass to a named beneficiary outside the estate and are generally excluded from the gross estate, unless the estate itself is the beneficiary.

Emergency fund

Liquid savings covering three to six months of essential expenses. It prevents forced liquidation of investments or new debt during income interruption.

Debt-to-income ratio

Total monthly debt payments divided by gross monthly income. A high ratio reduces borrowing capacity and signals over-leverage.

Education funding estimate

Inflate current tuition to the enrollment date, then compute annual savings needed using the expected return and the number of years to accumulate.

Mandatory employee benefits

Statutory benefits include SSS, PhilHealth, Pag-IBIG, 13th month pay, and service incentive leave. Employers must comply regardless of contract terms.

Key-person insurance

Coverage on a critical individual whose death would harm the business. Proceeds help replace lost profit or fund the purchase of the deceased owner's share.

Fiduciary duty

The planner must act in the client's best interest, place the client above self-interest, and avoid or disclose conflicts. It is the core ethical standard of practice.