Planit:Competency Based Assessment

From Planipedia

This pages includes thoughts on how to approach competency based assessment of students in financial planning educational programs where Students must deponstrate the ability to "Do", not just "Know".

Contents 1 Building on Core Subject Material 1.1 Correlation with FPSB Topics 1.2 Workbook Case Studies and Exercises 1.3 Integration with Financial Planning Functions 2 Building On Capstone/Integrated Material 2.1 Correlation with Capstone Content 2.2 Workbook Case Studies and Exercises 2.3 Workshop or Classroom Agenda 2.4 Integration with Financial Planning Functions 3 Getting Real Client Experience 3.1 Sample Questions for the Interview 3.2 Integration with Financial Planning Process 3.3 Fact Finder and Data Collection 3.4 Client Assessment Survey on Professional Skills 4 Creating a Financial Plan for Standard Evaluation 4.1 Standard Exam Case Studies 4.2 Quick Match Answer Keys

Building on Core Subject Material

Correlation with FPSB Topics

The Financial Planning Standards Board (FPSB) has defined a competent financial planner as one who demonstrates knowledge and relevant abilities in the six fields listed below. PlanPlus for Students employs professional tools and calculations important to each of these topics. The Workbook and Answer Guide have been specially organized to go over the various and overlapping components of each FPSB module individually. Within each topic chapter, the Workbook explains theoretical knowledge, special jurisdictional issues and planning assumptions relevant to the process of data entry, document production and document interpretation:

1. Financial Management – Present and Future Values Calculator, Bond Calculator, Loan Calculator and amortization schedules, repayment methods for loans, Critical Illness Calculator, Long-Term Care Calculator, summary account balances, personal use holdings and mortgages, inventory of account types, Net Worth Statement, summary cash flow: income and savings, tracking detailed cash flow, sources of employment income, pension or investment income, calculating family and living expenses, comparing known monthly costs, savings and reinvestment, income taxes, evaluating education goals for dependants, entering lifetime objectives, Other Goal Needs Calculator.
2. Asset Management – using Product Master to add real investment holdings, entering asset ownership details, Adjusted Cost Bases, capital gains taxation, product liabilities, properties of account types, detailed personal use holdings and mortgages, Detailed Holdings Statement, reinvesting investment income, risk profiling, reviewing asset allocation portfolios, historical return data, risk-based target investment portfolios, security selection for portfolio implementation, Investment Policy Statement interpretation of educational content and recommendations
3. Risk Management – need for salary replacement, lump sum costs and benefits, insurance coverage, jurisdictional government benefits, Life Insurance Calculator, Disability Insurance Calculator, Long-Term Care Calculator, Critical Illness Calculator, single needs insurance analysis vs. life goals needs on death and disability, emergency funds, whole and term life insurance, annual disability benefits, taxation and indexation of benefits, detailed individual insurance policies, Insurance Report, reduction of pensions or revenues on death or disability, goal requirement on death or disability, Risk Management document interpretation
4. Tax Planning – Adjusted Cost Bases, capital gains taxes on investments, taxation of insurance benefits, taxation of savings types, jurisdictional income tax tiers, personal allowances, tax deductions or reliefs, Income Tax Projection Report, taxation of revenues or pensions, special taxes on sale of businesses or property, marginal or estate tax rates, taxation of distributions to beneficiaries, life goals T1 tax projections, average tax vs. annual taxes, interpreting the Long-Term Cash Flow spreadsheet.
5. Retirement Planning – Retirement Goal Needs Analysis, retirement and mortality age assumptions, inflation, taxation and return on investments, single needs vs. life goals retirement analysis, inheritances, sale of business revenue, residence downsize, supplementary retirement income, appropriate old age/security benefits, calculation of defined benefit pension plans, defined contribution pension plan accounts and savings, lifetime objectives, modification of revenues and goals for delayed retirement, tierring retirement lifestyle, employer savings, tiered savings, preferred thresholds automatic model strategy, tierring risk profile, Personal Financial Strategy interpretation, Long Term Cash Flow spreadsheet interpretation and analysis.
6. Estate Planning – designating beneficiaries of accounts, paying debts on death, impact of whole life insurance policies, burial and probate expenses, checking for key documents, estate distributions, calculating marginal or estate taxes, taxation of distributions to beneficiaries, interpreting the Will Analysis and estate shortfalls, implications of scenarios.

Note: topics may vary slightly depending to reflect jurisdictional planning issues.

Workbook Case Studies and Exercises

The Student Workbook presents essential financial planning theory in conjunction with entering case study information to familiarize students with PlanPlus for Students functions and assumptions. FPSB requires that students not only possess the bodies of knowledge, but also the skills and abilities to complement them. By exposing students to professional software now, students can experience how academic concepts apply to real client situations and the planning process surrounding it. This is the first step of those outlined to create confidence when presenting solutions to clients’ financial problems. Getting hands on experience with document production and interpreting the recommendations is essential to transitioning students to professional financial planners.

Each workbook chapter also contains case study exercises so the student can test their practical knowledge on data entry for document production and dealing with problems particular to the topic. The Instructor’s Answer Guide provides step-by-step instructions on how to enter the case study information in PlanPlus for Students to properly handle planning issues. Workbook exercises can be a useful tool as homework assignments or projects, with a readily available answer key with which to mark assignments and/or present feedback. The Web Advisor is an online tool, so in-class, live lectures should be easy to present.

Integration with Financial Planning Functions

The three FPSB abilities required of CFP students are simply reflected in the Student Workbook and Fact Finders available in PlanPlus for Students. Any CFP module course can then provide the material to facilitate learning in these practical areas:

Collection – PlanPlus for Students’ comprehensive “Fact Finders” list required and relevant information necessary for the advisor to understand the financial position of the client and complete a financial plan. Fact Finders are meant for the planner to review with clients during a meeting, and/or to give to clients to fill out in their own time. The two Fact Finders – for investment management and life planning – are organized for clear and concise data collection, while allowing opportunities for advisors to ask more open-ended questions.

Analysis – Workbook case studies and exercises present planning problems relevant to the topic area, such as calculating defined benefit pension plans or performing security selection appropriate for the clients’ risk preferences. The Student Workbook offers a wide-range of financial planning problems that make up smaller parts within the creation of an overall strategy.

Synthesis – After piecemeal data entry and problem solving, students can run calculators, view reports or produce full-bodied financial strategies for their PlanPlus for Students’ client. The Investment Policy Statement (IPS) depicts the change in investments required to achieve an efficient asset allocation fitting to the clients’ risk profile, (including a detailed list of proposed products when security selection has been completed). The Personal Financial Strategy (PFS) shows a clients’ financial shortfall or surplus based on a full life goals tax analysis. Based on client preferences for modeling entered in special PlanPlus for Students screens, the PFS provides a strategy with an estate surplus while considering the clients’ needs. The IPS and PFS documents come with an “Action Plan” outlining the steps needed to implement the strategy with clients. Other documents relevant to core topics are also produced and interpreted.

Building On Capstone/Integrated Material

Correlation with Capstone Content

PlanPlus for Students is designed to depict all aspects of a clients’ financial life and needs. The Integrated Planning level of the professional software combines financial and asset management, risk management, tax planning, retirement planning and estate planning into a cohesive document: the Integrated Financial Plan (IFP). The IFP can provide:

• a detailed view of cash flow for determining where future savings may come from
• security selection for implementing an efficient risk portfolio with returns contributing to financial objectives
• complete life goals analysis for needs on death and disability with specific changes to goals, insurance benefits and revenues
• jurisdictional T1 tax embedded into calculations
• a strategy with a successful financial outcome and estate surplus, based on clients’ shortfalls and preferences for automatic modeling
• analysis of estate distribution including taxes, life goals and insurance benefits

This constitutes only a part of the IFP, but clearly all FPSB topics and financial planning components truly become integrated within this single document.

Workbook Case Studies and Exercises

For students who are already familiar with PlanPlus for Students from core CFP modules, the Capstone level of the Student Workbook will simply be a synthesis of all topics previously studied into a single case study and exercise. What will become apparent, however, is the real-life difficulty required to solve multiple problems that each have different, or even conflicting solutions. With a need to save more, reduce debt, meet important life goals and leave an estate, clients’ financial lives quickly become complex, and much room is left for discussion.

For that reason, the Capstone case study lays out the steps for data entry, offers key notes where analysis can become ambiguous, and an interpretation of the IFP, but the student will have to discern for themselves the implications of their analysis and following recommendations. The exercise follows a similar format, (leaving instructional notes and data entry in the answer guide), but also provides some key questions on planning issues encountered and how one attempts to resolve them.

Workshop or Classroom Agenda

Whether paired with Workbook case studies or presented live as stand-alone material, PlanPlus provides a workshop agenda for instructors to go over document production and analysis and developing professional skills. The workshop agenda is customizable but provides a timeline, overview of key topics and specific notes for the instructor. With screen shots and lecture notes for the lecture to emphasize and build on, instructors can easily prepare up to ten hours of presentational material. The agenda lays out the most fundamental features of interpreting and entering client information at the cumulative levels of Investment Management, Life Planning, and Integrated Planning. By doing so, instructors can also target students completing certification at different levels, such as AFP. A large portion of AFP material is also required for the CFP level, so small breaks in workshop content allow for presentations to efficiently switch material relevant to various student groups.

Integration with Financial Planning Functions

The three FPSB abilities required of CFP students can still be simply reflected in the Student Workbook and Fact Finders at the Capstone level:

Collection – PlanPlus for Students’ life planning Fact Finders list all of the required fields necessary to understand the financial position of the client and complete the integrated financial plan including estate distribution. The Fact Finder is organized for clear and concise data collection, while allowing opportunities for students to ask more general questions and practice interacting with new clients.

Analysis – the Capstone Workbook presents planning problems in the form of case studies and exercises, which may be relevant to specific topics, or force advisors to deal with multiple issues in determining clients’ financial abilities and priorities. Examples may range from calculating defined benefit pension plans to determining a client’s propensity to save for retirement/purchase whole life insurance, or designing an investment portfolio appropriate with risk profile responses. At the Capstone level, analyses are always situated within the context of a broad IFP case study, integrating a wide range of financial planning issues.

Synthesis – After piecemeal data entry and problem solving, students should have sufficient data produce an Integrated Financial Plan. The IFP depicts a lifetime strategy for your clients in terms of their annual savings, investment accounts and portfolios, spending on personal objectives, disposition of assets during retirement and at death, need for insurance or emergency funds and more. All six FPSB topics become truly integrated to produce a life plan requiring occasional monitoring and adjustment. The IFP is reviewed in the Student Workbook to provide students with an understanding of the methodology of calculations, content of the document, and the implications of recommendations. The IFP also contains an “Action Plan” outlining steps for implementing the strategy.

Getting Real Client Experience

Sample Questions for the Interview

Interacting with new clients can be an intimidating and disorganized process if students or professional financial planners do not know the aims of their meeting, what questions need to be asked, or if they are not confident in the services they provide. Students are responsible for the majority of the interview, but to make it a positive learning process, students should outline the purpose of the interview, information or communication objectives for asking questions, and the types of questions that are then appropriate.

For this reason, PlanPlus Web Advisor provides a short list of key questions that can lead students through their conversation with the client. Listed below are some open-ended questions to facilitate discussion and discovery:

• What do you think my responsibilities as your financial planner are or should be?
• How long do you feel our client-planner relationship is necessary?
• What are your personal and financial goals, or your objectives for having a financial planner?
• What objectives do you feel are most important to you?
• Are there are particularly immediate time or monetary restraints?
• Do you understand the recommendations that I have presented?
• Do you have any particular concerns?

These questions are not meant to stand alone, but should create a meaningful dialogue between the client and the student to make sure that all financial and administrative issues are mutually understood.

In their final format within the Student Workbook, these sample questions provided by PlanPlus are more specific to the assessment documents produced in PlanPlus for Students and surrounding financial planning issues. So for example, the Asset Management chapter may contain questions about feelings toward risk, concerns in the implementation of the Security Selection portfolio, and the responsibilities of the financial planner in the investment management process.

Integration with Financial Planning Process

The aims of these sample questions will reflect the aims of the FPSB Financial Planning Process, and will also be organized under the same headings, in the same order. This way, students can easily mimic the Financial Planning Process in the client interviews, but also grasp the practical purpose and methodology behind each step:

1. Establish and Define the Client-Planner Relationship – explain the services provided by a financial planner, agree on responsibilities of both parties, define length of service and payment, establish trust
2. Gather Client Data – discover all relevant personal and financial goals, identify time restraints, go over required data for plan production, gather needed documents
3. Analyze and Evaluate Financial Status – discover client objectives, discover clients’ risk preferences, enter PlanPlus for Students data for relevant process flow, review Asset Allocation screen, Insurance Calculators, Retirement Goal Needs Calculator, supporting external calculations
4. Develop and Present Financial Planning Recommendations – produce Investment Policy Statement, produce Personal Financial Strategy, produce Integrated Financial Plan, present document overview and aims, highlight key education material, highlight key strategy recommendations, note client concerns, make recommendation revisions
5. Implement the Recommendations – complete Security Selection for target asset allocation, review Action Plan and planning objectives, assign actors and objective dates, coordinate details for performing action
6. Monitor the Recommendations – agree on responsibilities, decide period for review

Questions for each part of the Financial Planning Process should strengthen the client-planner relationship and fulfill the aims of each of the six steps.

Fact Finder and Data Collection

Without all pieces of information, including the seemingly small assumptions, a financial plan would be incomplete and inaccurately reflect the client’s situation and needs. To ensure that step two of the financial planning process, “Gather Client Data”, is completed successfully and entirely, students can use the PlanPlus Fact Finders.

Fact Finders are instrumental tools for collecting the data necessary to complete PlanPlus for Students’ screens. The two Fact Finders – one for Investment Management and another for Life or Integrated Planning – show simplified versions of the data entry fields so students can record details and assumptions as they talk with the client. The Fact Finders also include a “Document Checklist” page so that the student can quickly scan for supporting documents needed to fill in informational gaps.

Client Assessment Survey on Professional Skills

While students clearly gain real-life experience for professional growth beyond the classroom, it is also important that educational institutions have a tangible way to evaluate the student’s completion of the interactive client component for the course.

As a starting point for grading student participation and interaction with the volunteer client, PlanPlus provides a standard assessment survey. The assessment survey is attached with the Instructor’s Answer Guide for review by educational institutions and instructors, but is to be completed by the client working with the AFP or CFP student. Note: the assessment survey may also be handed in with the document produced for and presented to the client. This ensures that the student actually interviewed the client and completed a plan for presentation. The questions on the assessment survey mark the student on a scale of 1 to 5, for performance on the various components of FPSB Professional Skills. Clients grading students on the professional skills developed from real client experience reflect the practical truth that a planner’s professionalism is meant to serve the client. Below are some sample questions within the Client Assessment Survey:

• Professional Responsibility – did the student try and succeed in establishing your trust? Act in your best interests? Exercise ethical judgment? Exhibit intellectual honesty? Adopt the role of financial planner in interest of the public?
• Practice – did the student take responsibility for providing financial planning services during the engagement? Show initiative in arranging meetings and completing plans? Show awareness of economic or legal conditions?
• Communication – did the student listen to your concerns and recommendations? Communicate ideas competently and with comprehension? Establish a good rapport? Support recommendations with sound reasoning and logic? Deal with your complaints or objections effectively? Come to an agreement?
• Cognitive – did the student ask about a variety of financial planning aspects? Use multiple information sources and documents? Adapt their way of thinking when necessary? Make logical and informed decisions?

These questions will only be provided to the instructor, who may choose whether the grading template is shared with students before or after the project. The questions are generic and do not focus on specific course material, but instructors may supplement the standard assessment survey with additional questions.

The total score given to the student by the client may not constitute a large portion of the final course mark, but by including it as an assessment component, students are required to interview clients and/or present documents. This fulfills the real-life professional experience necessary for the competency-based CFP designation.

Creating a Financial Plan for Standard Evaluation

Standard Exam Case Studies

In addition to the Workbook case studies and exercises already described, PlanPlus provides instructors with an additional booklet containing “final exam case studies”. The process of marking tens or hundreds of student financial plans can become quite cumbersome, so by providing a single case study to all students, with an accompanying answer key, integrating document production into examination is easily standardized.

There is one final exam case study for each FPSB Topic, (including the Capstone level), reflecting the most important components shown in preceding case studies and exercises. Documents cannot be ‘reused’ by students from year to year due to the changing nature of annual data (such as historical rates of return). Also, students must enter the exam data on PlanPlus for Students, under their own student User ID. Once students have completed the course they are removed from PlanPlus for Students.

Quick Match Answer Keys

The accuracy of client data entry and producing reports is important to the examination process because data entry can be marked quickly, and using quantifiable standards. But data entry can be even more significant in professional circumstances, where the appropriateness of recommendations made to clients depends every piece of information and consequent calculations. Even small typos can result in ‘off’ projections.

The Instructor booklet of “final exam case studies” contains images of all the screens that students must go through to enter the case study data. These screen shots how the entered data appears in its correct form. Since the instructor can view student activity and clients that have entered, the instructor’s answer key can be quickly compared to the data entry screens as completed by individual students. The Instructor’s exam answer key also highlights important fields in the different screen shots. Instructors can quick tally the student’s matching data entry fields for a total sum score.

Instructors are also provided with the final document based on correct data entry, but generally this will not be used as an answer key, since document accuracy is dependent on the data entry accuracy.

Note: if class size and time permit, instructors may also want to provide supplementary questions assessing student understanding and interpretation of the examination case studies by asking them to explain their reasoning for data entry and how they interpreted the resulting document.