FP II Cheatsheet — Advanced Planning Formulas, Decision Tables, Checklists & Glossary

Use this as your last-mile FP II review. Pair it with the Syllabus for coverage and Practice for speed.

For official exam details, see Overview (CSI sources linked there).

FP II in one picture (integrate across domains)

    flowchart TD
	  A["Client facts"] --> B["Goals + constraints"]
	  B --> C["Gap analysis (cash / tax / retirement / risk)"]
	  C --> D["Solutions (invest / insure / fund / structure)"]
	  D --> E["Document + implement"]
	  E --> F["Monitor + adjust"]
	  F --> B

If you can answer these three questions from any stem, you’re usually close to the best option:

• What is the goal?
• What is the tightest constraint?
• What is the next correct step? (missing facts, documentation, suitability, legal/tax check)

Case question workflow (fast)

When the stem is long, use this loop:

• Extract facts: income stability, debt load, dependents, business ownership, timeline, liquidity needs, tax/legal flags.
• Name the constraint: time horizon, liquidity, risk capacity, legal/tax/contract constraints.
• Pick the tool: “cash flow fix” vs “balance sheet fix” vs “tax structure” vs “retirement gap” vs “insurance transfer” vs “estate/legal update”.
• Choose the next step: gather missing inputs, confirm scope/consent, document, then recommend.

Elimination rule: answers that skip required steps (missing facts, missing documentation, missing legal/tax check) are often wrong.

Case notes template (30 seconds)

Write down a tiny “planner’s worksheet” before you look at the answer choices:

Planning practice (Ch 1)

Ethics and responsibilities (planner reflex)

• Document assumptions and constraints; avoid “one-size” solutions.
• Confirm the client’s understanding (especially when trade-offs are involved).
• Watch for conflict/vulnerability language and choose the “protect the client” option (concept).

Risk profile triad (do not mix up)

• Risk tolerance: willingness to accept volatility.
• Risk capacity: ability to absorb losses without derailing the plan (time horizon, liquidity, income stability).
• Risk required: return needed to meet goals; when it’s unrealistic, the best answer often resets the plan (concept).

Engagement + documentation (what the best answer tends to do)

• Clarify scope and deliverables (what you are / are not solving).
• Gather key facts before recommending.
• Provide options and trade-offs; document the rationale and next review trigger.

Client constraints (fast scan)

Suitability rationale (how to justify fast)

If two answers are both “possible,” choose the one that best links:

\[ \text{Goal} \rightarrow \text{Constraint} \rightarrow \text{Tool feature} \rightarrow \text{Trade-off} \rightarrow \text{Next step} \]

Trade-off mapper (concept)

Documentation checklist (planner reflex)

• state assumptions and constraints
• disclose trade-offs and why the chosen tool fits
• document suitability and client understanding (concept)
• set review triggers (life event, income change, rate reset, market dislocation)

Savings planning & debt management (Ch 2–4)

Net worth and cash flow (core statements)

\[ \text{Net worth}=\text{Assets}-\text{Liabilities} \]

\[ \text{Net cash flow}=\text{Cash inflows}-\text{Cash outflows} \]

Exam use: identify whether the problem is (1) a cash flow deficit, (2) leverage/solvency, or (3) a planning mismatch.

Cash management planning (Ch 2)

• Separate recurring obligations from discretionary spending (concept).
• Build a buffer for uncertainty (income variability, rate resets, business volatility) (concept).
• Convert annual/irregular costs into monthly sinking funds (property tax, insurance, repairs) (concept).

Savings rate (signal, concept)

\[ \text{Savings rate}=\frac{\text{Savings}}{\text{Gross income}} \]

Interest rate conversions (concept)

If compounding occurs \(m\) times per year:

\[ \text{EAR}=\left(1+\frac{r}{m}\right)^{m}-1 \]

Exam use: compare borrowing options on a consistent basis (concept).

Debt service ratios (concept)

\[ \text{GDS}=\frac{\text{Housing costs}}{\text{Gross income}} \]

\[ \text{TDS}=\frac{\text{Housing costs}+\text{Other debt payments}}{\text{Gross income}} \]

Exam use: when two answers both “work”, the better one is often the one that preserves capacity and buffers.

Amortizing loans (what payments do, concept)

• Payments contain interest + principal; early payments are interest-heavy (concept).
• Longer amortization lowers payment but increases total interest (concept).

Remaining balance after \(k\) payments (concept):

\[ B_k=P(1+i)^k-\text{PMT}\cdot\frac{(1+i)^k-1}{i} \]

Rule of 72 (quick compounding intuition, concept)

\[ \text{Years to double}\approx\frac{72}{\text{rate \%}} \]

Debt consolidation checklist (concept)

• compare all-in cost (rate + fees + penalties)
• confirm the new term doesn’t hide higher total interest via slower paydown
• fix the behaviour loop (budget leak) or balances often reappear
• stress-test payment affordability under income shocks (concept)

Debt planning playbook (Ch 3)

• Refinance to meet goals: compare all-in savings vs fees/penalties and time horizon (concept).
• Lease vs buy: list cash flows; don’t ignore maintenance/insurance/resale; then choose based on flexibility and total cost (concept).
• Borrow to invest: compare after-tax return vs after-tax borrowing cost and add a risk buffer (concept).

Refinancing break-even (concept):

\[ \text{Break-even months}\approx \frac{\text{Fees}}{\Delta\text{PMT}} \]

Borrow to invest (concept)

A simple screening idea: compare after-tax return vs after-tax borrowing cost.

\[ r_{\text{after}}=r_{\text{pre}}(1-t) \]

Where \(t\) is the marginal tax rate (concept).

Lease vs buy (how to reason)

You don’t usually need full NPV math; you need to:

• list cash flows for each option (payments, maintenance, insurance, resale value)
• identify the dominant constraint (cash flow stability, flexibility, total cost)
• choose the option that best aligns with goals and constraints (concept)

Mortgage planning (Ch 4) — payment intuition

\[ \text{PMT}=P\cdot\frac{i(1+i)^{n}}{(1+i)^{n}-1} \]

Where \(P\)=principal, \(i\)=periodic rate, \(n\)=number of payments.

Exam trap: distinguish term (contract/rate period) vs amortization (time to repay).

Loan-to-value (LTV) framing (concept):

\[ \text{LTV}=\frac{\text{Loan balance}}{\text{Property value}} \]

Mortgage decision reflex (concept):

• If the client may move/refinance soon, penalties and flexibility can dominate the “best” answer.
• If income is unstable, rate-reset risk and buffers matter more than headline rate.

Investment management & tax planning (Ch 5–7)

Investment management (Ch 5) — IPS mini-template

Modern portfolio theory (concept)

Expected return:

\[ E[R_p]=\sum_i w_i E[R_i] \]

Two-asset variance (concept):

\[ \sigma_p^2=w_1^2\sigma_1^2+w_2^2\sigma_2^2+2w_1w_2\rho_{12}\sigma_1\sigma_2 \]

Exam use: diversification benefits increase as correlation \(\rho\) decreases (concept).

Asset allocation and rebalancing (concept)

• Use strategic allocation to match goals and risk capacity.
• Rebalance when drift becomes material or the client situation changes (concept).
• If a choice increases expected return but violates liquidity or risk capacity, it’s often wrong.

Performance measurement (concept)

Holding period return:

\[ \text{HPR}=\frac{\text{Ending value}-\text{Beginning value}+\text{Cash flows}}{\text{Beginning value}} \]

Time-weighted return (concept):

\[ \text{TWR}=\prod_{k=1}^{n}(1+r_k)-1 \]

Exam use: if the question is evaluating manager skill, time-weighted logic is typically the relevant framing (concept).

Sharpe ratio (concept):

\[ \text{Sharpe}=\frac{R_p-R_f}{\sigma_p} \]

Money-weighted return (MWR / IRR) intuition (concept)

Time-weighted return isolates the manager; money-weighted return reflects the investor’s timing and contributions (concept).

IRR solves:

\[ 0=\sum_{t=0}^{n}\frac{CF_t}{(1+r)^t} \]

Tax efficiency of return types (concept)

Asset location (where to hold what, concept)

Tax planning strategies (Ch 6–7) — exam thinking

Most tax questions collapse to:

1. identify the tax driver (income type, timing, attribution/ownership, registered vs non-registered)
2. pick the strategy type (deferral, splitting, shelter, registered plan choice)
3. check constraints (cash flow, eligibility, time horizon) (concept)

Registered/structured accounts in this course include (see curriculum): RESP, RDSP, informal in-trust accounts (concept), and TFSA.

Strategy types (high-yield table)

Registered/structured account selection (concept)

RESP / RDSP / in-trust (what exam questions usually probe)

RESP (concept):

• purpose-fit: education goal + timeline
• understand that withdrawals can have different components; some amounts may be taxable to the beneficiary (concept)
• avoid “plan mismatch” errors: using education structures for non-education goals

RDSP (concept):

• disability-focused, long-horizon planning
• eligibility and withdrawal constraints matter (concept)
• watch sequencing with other benefits and family cash flow (concept)

Informal in-trust (concept):

• focus on ownership/attribution, control, and documentation
• avoid mixing “child’s money” with “parent’s goals” (legal/suitability risk)

Retirement planning (Ch 8–9)

Time value of money (the 4 formulas you reuse)

\[ PV=\frac{FV}{(1+i)^n} \]

\[ FV=PV(1+i)^n \]

\[ PV_{\text{ann}}=PMT\cdot\frac{1-(1+i)^{-n}}{i} \]

\[ FV_{\text{ann}}=PMT\cdot\frac{(1+i)^n-1}{i} \]

Solve for the contribution needed (concept):

\[ PMT\approx FV_{\text{target}}\cdot\frac{i}{(1+i)^n-1} \]

Solve for the withdrawal supported by a capital amount (concept):

\[ PMT\approx PV\cdot\frac{i}{1-(1+i)^{-n}} \]

Retirement income needs analysis (workflow)

1. estimate annual spending need (concept)
2. subtract reliable income sources (pensions, government benefits) (concept)
3. compute funding gap and required capital (PV of annuity) (concept)
4. compare to projected assets (FV of savings + existing assets) (concept)

Replacement ratio (concept):

\[ \text{Replacement ratio}=\frac{\text{Retirement income}}{\text{Pre-retirement income}} \]

Real vs nominal return (don’t mix dollar types)

\[ (1+r_{\text{nom}})\approx(1+r_{\text{real}})(1+\pi) \]

Defined benefit vs defined contribution (concept)

Government benefit impacts (concept)

The curriculum calls out OAS, GIS, and CPP/QPP as separate impacts. Exam reflex:

• identify which benefit applies
• recognize that benefits interact with other income sources (concept)
• do not assume government benefits “solve” the retirement need

Employer plans and structures (concept)

The curriculum includes DPSPs, IPPs, SERPs, and SDAs. Exam-friendly framing:

• DPSP: employer-sponsored deferred savings (concept).
• IPP: pension structure for incorporated/self-employed contexts (concept).
• SERP/SDA: executive/salary deferral arrangements; think “timing, documentation, and constraints” (concept).

Retirement income products and plan mechanics (Ch 9)

Know the purpose of:

• RRSP accumulation and contribution planning (concept)
• RRIF and LIF decumulation framing (concept)
• annuities as longevity-risk transfer (concept)

Decumulation comparison (concept):

Withdrawal sequencing (planner logic, concept)

• match withdrawals to the spending timeline (short-term cash vs long-term growth)
• minimize “forced selling” by keeping a liquidity buffer
• consider tax timing and benefit interactions before choosing a withdrawal order (concept)

Sequence risk (concept)

When withdrawals start, early losses can permanently reduce sustainability. Exam reflex:

• reduce risk to match withdrawal horizon (concept)
• keep liquidity buffers so withdrawals aren’t forced at the wrong time

Insurance planning (Ch 10–13)

Needs analysis inputs (what you must gather)

• dependents and support horizon
• debts and goals (mortgage, education, estate liquidity) (concept)
• existing assets and existing coverage/benefits (concept)
• business ownership and key-person risks (concept)

Life insurance needs analysis (capital needs, concept)

\[ \text{Coverage}\approx (\text{Debts}+PV_{\text{income}}+\text{Other goals})-(\text{Existing assets}+\text{Other benefits}) \]

\[ PV_{\text{income}}=PMT\cdot\frac{1-(1+i)^{-n}}{i} \]

Policy taxation and planning use (concept)

The curriculum includes tax treatment and calculating taxes on life insurance. Exam approach:

• focus on what is being taxed, when, and who bears it (concept)
• confirm the plan objective (income replacement vs estate liquidity vs business continuity)

Insurance contracts (Ch 11)

High-yield buckets:

• legal aspects of the insurance contract (concept)
• policy provisions, riders, and dividend options (concept)

Term vs permanent insurance (concept)

Beneficiary and ownership choices (concept)

Business uses of insurance (concept)

• key person risk transfer and continuity planning
• buy-sell funding (owner transition)
• estate liquidity planning for private company owners (concept)

Income protection product design (concept)

Protecting income and savings (Ch 12)

Be able to match the risk to the protection type:

• disability vs critical illness vs long-term care
• provincial vs extended health
• travel insurance
• group life and health insurance

General insurance (Ch 13)

Know the broad coverage intent and common liability framing (concept).

Property vs liability thinking (concept)

• Property: protects against loss/damage to things; focus on limits, deductibles, exclusions (concept).
• Liability: protects against harm to others; focus on coverage trigger, defence costs, and limits (concept).

Small business planning (Ch 14–15)

Ch 14 and 15 connect business law (contracts/agency) with practical small business planning topics:

• business entity forms (concept)
• valuation framing (concept)
• employment and business taxation (concept)
• estate freezes as an owner transition tool (concept)

Business entities (concept)

Business continuity checklist (concept)

• identify key dependencies (people, contracts, customers, lenders)
• clarify ownership agreements (partnership/shareholder terms) (concept)
• plan funding for disruptions (insurance, liquidity, credit facilities) (concept)
• align owner compensation/withdrawals with personal cash flow needs (concept)

Valuation framing (concept)

• Asset-based: value of assets minus liabilities (concept)
• Income-based: value depends on sustainable cash flow (concept)
• Market-based: comparable transactions (concept)

NPV (discounted cash flow concept):

\[ NPV=\sum_{t=0}^{n}\frac{CF_t}{(1+r)^t} \]

Estate freeze (concept)

Think “lock in value + shift future growth,” typically used for succession and tax/estate objectives (concept).

Family law (Ch 16)

Family law questions are often “plan impact” questions:

• what changes in cash flow (support), assets/liabilities, and risk
• what documentation and sequencing is required (concept)

Plan impact checklist (exam-friendly)

• update cash flow assumptions (support payments, housing changes) (concept)
• revisit risk capacity and liquidity needs
• review beneficiaries, wills, and POA arrangements (concept)
• check which accounts/assets need documentation updates and sequencing (concept)

Domestic contracts (concept)

Post-separation planner checklist (concept)

• update cash flow for support and housing changes
• revisit retirement projections and insurance needs
• update beneficiaries, wills, and POA where appropriate (concept)
• document all changes and set a near-term review date

Estate planning (Ch 17–18)

Trusts and powers of attorney

Know:

• why a trust is set up (concept)
• basic trust taxation framing (concept)
• POA scope: property vs personal care, and risks/controls

Trust roles (concept):

• Settlor: creates the trust (concept)
• Trustee: manages assets for beneficiaries (concept)
• Beneficiary: receives benefits (concept)

Wills, probate, and taxes (concept)

Be able to explain:

• will preparation and probate purpose
• options intended to reduce probate impact (concept)
• minimizing/deferring taxes before death vs upon death (concept)

Trust types (concept)

Estate liquidity planning (concept)

• list liabilities and timing (tax, debts, expenses)
• identify which assets can be sold without disrupting the plan
• consider insurance as a liquidity tool when appropriate (concept)

Estate planning sequencing (what best answers do)

• confirm objectives (who gets what, when, and under what conditions) (concept)
• confirm constraints (family situation, business ownership, vulnerable beneficiaries)
• coordinate will + beneficiary designations + account titling (concept)
• document and schedule reviews after life events

Glossary (FP II)

• Agency relationship: authority for one party to act on behalf of another (concept).
• Annuity: income stream used to transfer longevity risk (concept).
• Attribution/ownership: who is considered to earn income for tax purposes (concept).
• Beneficiary designations: direct transfer mechanism that can interact with estate planning (concept).
• Capital gains: value increase taxed on realization timing under many systems (concept).
• Capital needs analysis: insurance approach focusing on obligations and goals if income stops (concept).
• Cash management planning: budgeting, buffers, and liquidity planning (concept).
• CPP/QPP: public pension program impacting retirement income mix (concept).
• Defined benefit (DB): pension benefit defined by formula; funding/inflation/survivor choices matter (concept).
• Defined contribution (DC): retirement plan where the account balance determines outcomes (concept).
• Correlation (\(\rho\)): co-movement measure used in diversification (concept).
• Debt service ratios (GDS/TDS): affordability measures for housing and total debt (concept).
• Deferred profit sharing plan (DPSP): employer-sponsored savings/retirement arrangement (concept).
• Domestic contract: agreement that can affect property/support outcomes (concept).
• Elimination period: waiting period before disability benefits begin (concept).
• Estate liquidity: cash needed to settle obligations and execute a plan (concept).
• Estate freeze: business succession tool to shift future growth while locking in value (concept).
• Family law triggers: marriage, separation/divorce, support obligations, property division (concept).
• FV/PV: future value / present value time-value-of-money measures (concept).
• GIS: benefit whose interaction with other income can be important (concept).
• IPP: pension structure used in specific business contexts (concept).
• IRR (internal rate of return): discount rate that sets NPV to zero; money-weighted return idea (concept).
• Insurance riders: contract add-ons that adjust coverage features (concept).
• Income splitting: strategy category that changes who receives/recognizes income (concept).
• Interest income: return type that often creates higher tax drag (concept).
• LIF: retirement income product with locked-in rules (concept).
• Letter of engagement: document defining scope, responsibilities, and deliverables (concept).
• Modern portfolio theory: diversification and portfolio-level risk/return framing (concept).
• Money-weighted return (MWR): performance measure influenced by contributions/withdrawals timing (concept).
• NPV: discounted cash flow value measure (concept).
• OAS: government benefit that can affect retirement planning (concept).
• Power of attorney (POA): legal authority to act for another person; scope matters (concept).
• Probate: legal validation/administration of an estate (concept).
• Replacement ratio: retirement income divided by pre-retirement income (concept).
• Revocable/irrevocable beneficiary: whether the owner can change beneficiary designation (concept).
• RRSP room: contribution capacity under current rules (concept).
• RRIF/RRSP: retirement income/savings vehicles with withdrawal and planning implications (concept).
• RDSP: disability-focused registered plan (concept).
• RESP: education-focused registered plan (concept).
• SERP/SDA: executive deferral arrangements referenced in the curriculum (concept).
• Sharpe ratio: risk-adjusted performance measure using volatility (concept).
• Sinking fund: set-aside savings for known future expenses (concept).
• Tax shelter / income splitting: strategy categories referenced in the curriculum (concept).
• Time-weighted return: performance measure for manager evaluation (concept).
• Trust: structure used for control, beneficiary outcomes, and estate planning (concept).