NATIONAL INSTITUTE OF SECURITIES MARKETS

Established by the Securities and Exchange Board of India

Certified Personal Financial Advisor (CPFA) for Examination

Test Objectives

1. Concept of Financial Planning

1.1 Understand what financial planning constitutes

1.2 Know the need for financial advisory services
1.3 Understand the scope of financial advisory services
1.4 Describe the financial planning delivery process
1.5 Understand client’s situation and goals
1.6 Understand importance of assessing client’s investment risk profile
1.7 Understand importance of assessing client needs
1.8 Understand parameters for recommending investment strategy
1.9 Know how to implement the advice with right products
1.10 Understand the importance of monitoring & reviewing periodically

2. Managing Investment Risk

2.1 Know different types of risk

2.1.1 Define
Market Risk (Systematic and Unsystematic)
Reinvestment risk
Interest rate risk
Purchasing power risk
Liquidity risk
Political risk
Exchange rate risk
Inflation risk
Tax Rate risk
Alpha
2.2 Understand how to measure risk
Certified Personal Financial Advisor Examination Page 1 of 6
 NATIONAL INSTITUTE OF SECURITIES MARKETS
Established by the Securities and Exchange Board of India

2.2.1 Define and calculate

Standard deviation
Beta including portfolio beta
Variance, semi-variance and covariance
Coefficient of variation and correlation
Probability
Mean
Median
Mode
2.3 Understand how to manage risk – Diversification and hedging
Types
Product
Time
Diversifiable and un-diversifiable risk

3. Measuring Investment Returns

3.1. Understand risk, return and investor outlook

3.1.1. Describe the relationship between risk and return,
3.1.2. Understand investors ability to take risk and willingness to take risk and identify
optimal portfolio allocation
3.2. Define and understand how to apply the following:
3.2.1. Time value of money
3.2.2. Annuities and its types
3.2.3. EMI
3.2.4. Compounding
3.2.5. NPV
3.2.6. Inflation and tax adjusted interest rates
3.2.7. Holding period return
3.2.8. CAGR & IRR
3.3. Distinguish between
3.3.1. Time weighted return Vs. money weighted return,
3.3.2. Real(Inflation adjusted) rate of return vs. nominal return,
3.4. Know how to assess mutual fund performance using benchmark and peer performance
3.5. Calculate
Certified Personal Financial Advisor Examination Page 2 of 6
 NATIONAL INSTITUTE OF SECURITIES MARKETS
Established by the Securities and Exchange Board of India

Total returns
Risk-adjusted returns
Sharpe ratio
Treynor Ratio
Jensen’s Alpha
3.6. Discuss Capital Gains, Types i.e. STCG and LTCG and taxation

4. Investment strategies

4.1. Explain Active and Passive strategies (Asset allocation across risky and risk-free
portfolios, cross border diversification, market timing, securities selection, maturity
selection, buy/hold)
4.2. Discuss asset allocation (Strategic asset allocation, application of client lifecycle
analysis, client risk tolerance measurement and application, asset class definition and
correlation, tactical asset allocation, fixed and flexible allocation, rebalancing strategies,
formulae based monitoring and revision of portfolios)

5. Insurance Planning

5.1. Understand objective of risk management, law of large numbers

5.2. Describe personal risk management, risk control and risk financing,
5.3. Name categories of insurance, features:
Insurance of Assets
Insurance of Liabilities
Term Insurance
Health Insurance
5.4. Explain life insurance needs analysis (Human life approach, Needs approach, Multiple
Approach, Capital needs analysis approach)
5.5. List types of life and health insurance products and their features (single payment/
multiple payment, money back policies

6. Retirement Planning

6.1. Detail Retirement Planning Process (Financial need analysis, determining needs,
replacement ratio and expense methods, future value, shortfall in retirement funding,

Certified Personal Financial Advisor Examination Page 3 of 6

 NATIONAL INSTITUTE OF SECURITIES MARKETS
Established by the Securities and Exchange Board of India

Inflation-adjusted discount rates and nominal return on investment, retirement products

like PF, gratuity etc
6.2. Describe annuities, its types, pension plans, NPS
6.3. Explain shifts in asset allocation before and during retirement as part of overall
retirement plan
6.4. Explain the concept of reverse mortgage and features of available products

7. Tax and Estate Planning

7.1. Heads of Income: gross total income, adjusted gross income, itemized deductions,
taxable income, tax liability, clubbing of income, taxation for NRIs, capital gains tax rules,
7.2. Characterization of gain or loss, netting rules, indexation benefits, capital loss
limitations, tax planning strategies (tax relief, exemptions, deductions, rebates)
7.3. Discuss Wealth Tax Act and its implication for clients
7.4. Describe Estate Planning
7.4.1. Fundamental objective of greater efficiency in wealth transfer
7.4.2. Valuing of an Estate
7.4.3. Hindu and Indian Succession Act, wills, probates, transfers through trusts and
contracts, Powers of Attorney, mutation, succession.

8. Investment Vehicles

8.1. Name and Describe Small Savings Instruments like

Public Provident Fund
National Saving Certificate
Kisan Vikas Patra
Post Office Monthly Income Scheme
Post office Term Deposit
Post Office Saving Accounts
Senior Citizen Saving Scheme
8.2. Name and Describe Fixed Income Instruments like–
Government Securities (Bonds, T-Bills, COD, CP, Zero Coupon Bonds, PN, etc.),
Corporate Securities (Corporate Bonds, Debentures, etc.)
Corporate Deposits
Bank Deposits

Certified Personal Financial Advisor Examination Page 4 of 6

 NATIONAL INSTITUTE OF SECURITIES MARKETS
Established by the Securities and Exchange Board of India

8.3. Name and Describe Mutual Fund Products like

Generic
Equity Growth Funds
Income Funds
Balanced Funds
Liquid Funds
Specific
Index Funds
ETFs
Thematic & Sectoral Funds
FMPs
Arbitrage Funds
Overseas opportunities
Short-term Funds for parking liquidity diversified equity fund
8.4. Define
Equity shares & its types
Dividend Yield
EPS
P/E
8.5. Define
Modes of valuation
Portfolio management aspects
Value growth investing
8.6. Define derivatives and commodities - essential features, types-Future and Options
(F&O)
8.7. Define real estate - forms of real estate investment, financing real estate, costs of buying
and maintaining, loans and financing
8.8. Name and Describe other investments
ULIPs
Bullion
Collectibles
Precious metals
Venture Capital
Private Equity

Certified Personal Financial Advisor Examination Page 5 of 6

 NATIONAL INSTITUTE OF SECURITIES MARKETS
Established by the Securities and Exchange Board of India

Structured Product
Participating Notes

9. Regulatory Environment and Ethical Issues

9.1 Explain need for regulation, regulation and investor protection

9.2 Describe overall framework of the regulatory system
Government Regulation
Self Regulation
Interface with the Judicial System
9.3 Explain role of the Ministry of Finance (MOF); Ministry of Company Affairs (MCA);
9.4 Explain roles of regulators: SEBI, RBI, IRDA, PFRDA
9.5 Discuss key acts and regulations:
SEBI Act
IRDA Act
SCRA and SCR Rules
Companies Act
Contract Act
PMLA
FEMA
9.6 Discuss ethical issues in providing financial advice
9.7 Detail codes of conduct by SEBI, IRDA, professional bodies
9.8 Describe investor complaint redressal mechanism

Certified Personal Financial Advisor Examination Page 6 of 6