IFC Cheatsheet — Mutual Funds, KYC, Portfolios, Fees, Regulation & Glossary

Use this cheatsheet as a rapid refresher alongside the Syllabus and Practice. IFC questions often reward the same skill: translate client facts into a suitable, compliant recommendation using the right vocabulary.

Official blueprint (CSI)

IFC is currently 100 multiple-choice questions. Weightings below map directly to target question counts.

Source: https://www.csi.ca/en/learning/courses/ifc/exam-credits

How to answer IFC scenarios (fast checklist)

1. What is the client’s objective (income / growth / preservation)?
2. What is the dominant constraint (time horizon / liquidity / risk capacity vs tolerance / tax sensitivity)?
3. What is the most suitable product/portfolio action (diversify, rebalance, reduce concentration, choose an appropriate fund type)?
4. What is the compliant action (complete KYC, document rationale, avoid prohibited selling practices)?

The representative’s role (Ch 1)

• Licensing signals baseline knowledge, client protection, and professional accountability (concept).
• Excellent service is a competitive advantage, but cannot override suitability and compliance.
• The exam often tests the difference between “helpful” behaviour and “prohibited/unsupported” behaviour.

Canadian financial marketplace + economics (Ch 2–3)

Market map (concept)

• Investment capital: funds supplied by savers and allocated to issuers through intermediaries.
• Instruments: debt, equity, derivatives, and managed products (like mutual funds).
• Markets: primary (issuance) vs secondary (trading); different instruments trade differently.
• Intermediaries: banks, dealers, fund managers, etc. (concept).

Economics quick cues (concept)

• Inflation and interest rates affect purchasing power and discount rates.
• Business cycle phases influence risk appetite and asset performance (concept).

KYC communication + financial planning (Ch 4)

Why KYC matters

KYC is not “form-filling.” It is the evidence for why the recommendation is suitable.

Financial planning process (exam-friendly template)

• Gather facts: objectives, horizon, liquidity needs, risk tolerance/capacity, income needs, tax context (concept).
• Identify constraints: what cannot be violated (short horizon, low risk capacity, liquidity need).
• Recommend: match product type to the constraint that dominates.
• Document: what you recommended and why.
• Review: update when circumstances change.

Life-cycle hypothesis (concept)

Consumption and savings decisions change over a lifetime. Practical implication: time horizon and risk capacity can evolve, which can change suitability.

Behavioural finance (Ch 5)

Common biases you should recognize (concept):

• Loss aversion: pain of losses outweighs joy of gains → clients may panic-sell.
• Anchoring: clinging to a reference price (“I’ll sell when it gets back to…”).
• Recency bias: overweighting recent performance.
• Overconfidence: excessive trading or concentrated bets.

Representative skill: diagnose bias and slow down decisions (reframe, confirm objectives, document).

Tax + retirement planning (Ch 6)

Keep it concept-first:

• Tax systems affect after-tax outcomes (not just pre-tax returns).
• Pension plans and tax-deferral plans influence time horizon, liquidity, and suitability (concept).

Investment products and how they trade (Ch 7)

Fixed income (concept)

• Debt security with coupon/interest and maturity; credit and interest-rate risk matter.

Equity (concept)

• Ownership claim; higher volatility; risk is tied to business and market conditions.

Derivatives (concept)

• Value depends on an underlying; used for hedging/speculation.

Bringing securities to market (concept)

• Primary market issuance raises capital; secondary markets provide liquidity.

Portfolios: risk/return, diversification, and process (Ch 8)

Return formulas (exam-friendly)

Holding period return \[ HPR=\frac{V_1-V_0+I}{V_0} \]

What it tells you: Total return over a period = change in value plus income, relative to the starting value.

Symbols (what they mean):

• \(V_0\): starting value.
• \(V_1\): ending value.
• \(I\): income/distributions received during the period.
• \(HPR\): holding period return.

How it’s tested (IFC style):

• Compute whether a fund/investment was profitable once distributions are included.
• Identify the correct denominator (start value) in return calculations.

Common pitfalls:

• Ignoring income \(I\) (distributions matter in mutual fund returns).
• Mixing percent vs decimal returns.

Portfolio return (weights) \[ R_p=\sum_i w_iR_i \]

What it tells you: Portfolio return is the weighted average of the component returns.

Symbols (what they mean):

• \(R_p\): portfolio return.
• \(w_i\): weight of holding \(i\) (fraction of portfolio value in \(i\)).
• \(R_i\): return of holding \(i\).

How it’s tested:

• Compute portfolio return from weights and holding returns.
• Identify which holding “drives” the portfolio outcome (largest weight × large move).

Common pitfalls:

• Weights not summing to 1 (missing cash position or rounding).
• Using target weights instead of actual weights after market drift.

Risk language (concept)

• Diversification reduces asset-specific risk; it does not remove market risk.
• Concentration and illiquidity are common red flags in suitability scenarios.

Financial statements (Ch 9)

At IFC depth, focus on recognizing the statements and what they describe:

• Statement of financial position (balance sheet): assets, liabilities, equity \[ \text{Assets}=\text{Liabilities}+\text{Equity} \]
• Comprehensive income: profitability over a period (concept)
• Changes in equity: how equity changes over time (concept)
• Analysis: what a change implies about risk, profitability, or sustainability (concept)

What it tells you: The balance sheet must balance—assets are funded by either liabilities (debt) or equity (owners’ claim).

How it’s tested (IFC depth):

• Classify items correctly (asset vs liability vs equity).
• Identify what a change implies (e.g., higher liabilities can increase leverage and risk).

The modern mutual fund (Ch 10)

What a mutual fund is (concept)

• A pooled vehicle where investors own units/shares of the fund, not the underlying securities directly.

NAV (must-know)

\[ NAV=\frac{\text{Assets}-\text{Liabilities}}{\text{Units outstanding}} \]

What it tells you: Net asset value per unit is the fund’s net assets divided by the number of units.

Symbols (what they mean):

• Assets: market value of the fund’s holdings plus cash/receivables (concept).
• Liabilities: fees payable, expenses, and other obligations (concept).
• Units outstanding: number of fund units/shares investors own.

How it’s tested:

• Interpret NAV movement when assets rise/fall or units change.
• Recognize that ETFs/closed-end funds can trade away from NAV (premium/discount), but mutual funds typically transact at NAV (concept).

Organization and regulation (concept)

• Understand that funds operate under a regulatory framework; transparency, disclosure, and suitability expectations are part of the investor protection model.

Mutual fund categories (Ch 11–12)

Conservative mutual fund products

• Money market funds
• Mortgage funds
• Bond/fixed-income funds

Riskier mutual fund products

• Equity funds
• Balanced funds
• Global funds
• Specialty funds

High-yield exam cue: match the fund category to the client’s horizon and risk capacity.

Alternative managed products (Ch 13)

Mutual fund performance (Ch 14)

Performance questions are often about comparison:

• Compare a fund to a relevant benchmark or peer universe (concept).
• Understand the idea of quartile ranking and why it can be misread in isolation (concept).

Evaluating and selecting mutual funds (Ch 15–16)

Selection steps (exam-friendly)

1. Confirm client objectives and constraints (KYC).
2. Choose an appropriate fund category (risk/return fit).
3. Evaluate fees and services.
4. Review performance in the right context (benchmark/universe).
5. Document rationale and next review trigger.

Fees and charges (concept)

• Fees reduce net returns over time.

Fee drag (concept) \[ R_{\text{net}}\approx R_{\text{gross}}-\text{fees} \]

What it tells you: Fees reduce net returns; the difference compounds over time.

Symbols (what they mean):

• \(R_{\text{gross}}\): return before fees (and before taxes).
• \(R_{\text{net}}\): return after fees (approximation).

How it’s tested:

• Choose between products based on after-fee outcomes (especially over long horizons).

Common pitfalls:

• Focusing on past performance without adjusting for costs.
• Forgetting that turnover can create additional drag (trading costs and tax effects in taxable accounts).

Accumulation plans and withdrawal plans (concept)

• Recognize how contribution and systematic withdrawal plans operate and what risks they introduce (sequence risk, sustainability, liquidity).

Regulation and ethics (Ch 17–18)

High-yield categories:

• regulators and self-regulatory organizations (concept)
• registration requirements and account opening steps
• KYC rules and ongoing updates
• prohibited selling practices and communication rules
• ethical standards and “best next step” in case studies

Formula pack (one place)

Explanations are provided above next to each formula; this section is a quick reference.

• \(HPR=\frac{V_1-V_0+I}{V_0}\)
• \(R_p=\sum_i w_iR_i\)
• \(NAV=\frac{\text{Assets}-\text{Liabilities}}{\text{Units outstanding}}\)
• \(R_{\text{net}}\approx R_{\text{gross}}-\text{fees}\)

Glossary (IFC terminology)

Accumulation plan — Program of regular contributions/investment into a fund (concept).
Benchmark — Reference index/portfolio used for comparison (concept).
Behavioural bias — Pattern of decision error (loss aversion, recency, anchoring) (concept).
Business cycle — Expansion/peak/contraction/trough phases (concept).
Closed-end fund — Fund with fixed capital that trades on the market; price can differ from NAV (concept).
Compliance — Following rules and policies; includes documentation and supervision (concept).
Diversification — Spreading exposure to reduce asset-specific risk.
Economic growth — Expansion in economic output, often measured with GDP (concept).
ETF — Exchange-traded fund; trades intraday and can have spreads/tracking differences (concept).
Fee drag — Reduction in net return due to fees and charges over time (concept).
Financial intermediary — Entity connecting savers and borrowers/investors and issuers (concept).
Hedge fund — Pooled vehicle using alternative strategies; risks can include leverage and illiquidity (concept).
KYC (Know Your Client) — Process of collecting client facts to support suitability decisions (concept).
Life-cycle hypothesis — Consumption/savings change over a lifetime; affects horizon and risk capacity (concept).
Liquidity constraint — Need for cash access that limits product choices (concept).
Mutual fund — Pooled investment vehicle issuing units/shares to investors (concept).
NAV — Net asset value per unit; common pricing reference for mutual funds (concept).
PPN (Principal-protected note) — Structured product with payoff terms; protection depends on issuer and conditions (concept).
Quartile ranking — Performance ranking relative to peers in quartiles (concept).
Registered plan / tax deferral plan — Plan with tax advantages/deferral characteristics (concept).
Risk capacity — Financial ability to take risk (distinct from willingness) (concept).
Risk tolerance — Willingness to experience volatility and loss (concept).
Segregated fund — Insurance-based pooled investment product with terms/guarantees (concept).
Suitability — Matching recommendations to objectives, constraints, and risk profile (concept).
Systematic withdrawal plan — Program of regular withdrawals from an investment (concept).