THE PARTIAL MANDATE What is a partial mandate? As the name suggests, a partial mandate is a mandate for clients who do not need complete integrated financial planning. How to proceed with a partial mandate For all your files you must complete the following sections: • Professional services contract (pp.1- 3) • Data collection questionnaire (client profile) (pp.4-10) • Sections concerning the situations related to the mandate entrusted to you by your clients (pp.11-35) For each of these situations, we have provided: • A list of the main objectives related to the situation • A list of the main documents that may be useful • References to La Collection de l’IQPF, related to every objective, to help you formulate your analyses and recommendations A partial mandate is a flexible tool that you can use in part or in whole, based on the needs and objectives of your client, and still provide integrated financial planning. Adapt it and customize it – it’s your personal work tool! We hope you will find it useful and that it will help you in the practice of integrated personal financial planning.
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THE PARTIAL MANDATE - IQPF · • Professional services contract (pp.1- 3) • Data collection questionnaire (client profile) (pp.4-10) • Sections concerning the situations related
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THE PARTIAL MANDATE
What is a partial mandate?
As the name suggests, a partial mandate is a mandate for clients who do not need complete integrated financial planning. How to proceed with a partial mandate For all your files you must complete the following sections:
• Professional services contract (pp.1- 3) • Data collection questionnaire (client profile) (pp.4-10) • Sections concerning the situations related to the mandate entrusted to you by your
clients (pp.11-35) For each of these situations, we have provided:
• A list of the main objectives related to the situation • A list of the main documents that may be useful • References to La Collection de l’IQPF, related to every objective, to help you
formulate your analyses and recommendations A partial mandate is a flexible tool that you can use in part or in whole, based on the needs and objectives of your client, and still provide integrated financial planning. Adapt it and customize it – it’s your personal work tool! We hope you will find it useful and that it will help you in the practice of integrated personal financial planning.
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PROFESSIONAL SERVICES CONTRACT
City, date
Addressee
Address
Subject: Financial planning
Ref. no.: File no. ____________
Dear (Addressee),
Further to our recent meeting, we wish to offer you our services to complete an integrated personal
financial plan, establish an action plan and, if necessary, make recommendations concerning the
objectives we discussed.
We are authorized to act in the following areas: financial planning, individual insurance, group savings,
(specify disciplines). We also offer the following financial products and services: financial planning, life
and disability insurance contracts, mutual funds (specify).
For greater certainty, our services will consist of examining the following areas:
Personal and family situation
Financial situation
Tax situation
Children’s education funding situation
Retirement planning situation
Estate planning situation
Protection situation
For each of these situations, we will take the accounting and tax consequences into consideration when
formulating recommendations and analysing your current situation.
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Consideration
For the services rendered, you agree to pay us the sum of $______________ for every hour worked in
relation to this contract, which we estimate at a total of approximately __________ hours.
The appropriate taxes (GST, QST), along with any fees and expenses incurred, will be added to this price.
You agree to make an immediate down‐payment of $__________, deductible from the total sum
invoiced, the balance of which will be due 30 days after invoicing. Interest in the amount of _____% per
annum will be charged on any balance unpaid after 30 days.
This contract may be rescinded at any time. In the event the contract is rescinded, you agree to pay for
any hours worked or expenses incurred up to the date of revocation.
Charges and conditions
As your financial planners, we agree to provide you with a written report that covers all of the items
listed above, accompanied if appropriate by charts outlining our analysis and recommendations.
In particular, we will keep you informed of our progress on your file, and the final report will be
submitted to you in approximately _________________________. We will then set up a meeting to
explain the contents and recommendations. If additional work is required, you will be informed and
additional fees may be charged.
You should understand that the report may need to be updated regularly. The fees for periodically
updating the report can be the subject of a later agreement.
You agree to answer all questions asked and to provide us with all documents necessary to carry out this
contract, whether they are in your possession or in the possession of third parties. To this end, you will
immediately sign letters authorizing us to obtain information directly from third parties. The information
obtained will remain confidential at all times and will not be used for any other purposes.
You understand that our responsibility is limited by our access to the documents provided and to their
content, and that the recommendations we offer are only valid insofar as the prevailing social, family,
economic and market conditions and laws remain unchanged.
Should the implementation of any of the recommendations made in the report require the services of
specialists, our coordination and integration fees will be charged over and above their fees.
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Sincerely,
(Signature)
Name of financial planner (BLOCK LETTERS)
Name of financial institution or firm
I, (enter the first and last name of the client), the undersigned, accept the terms of this service contract
and agree to uphold all of the conditions.
Signed in , this day of (month, year)
(Signature)
Name of client (BLOCK LETTERS)
Note: If remuneration is to be based on commissions on financial products sold, this must be clearly
indicated. In such a case, it is recommended that an alternate type of remuneration, such as an
hourly rate, be provided, in case the contract is rescinded.
Does the client expect any major cash inflows or outflows in the
next year?
Is the client interested in borrowing to invest?
Does the client have commitments from a previous marriage or
relationship?
Has the client opened a tax‐free savings account (TFSA)?
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POINTS OF ANALYSIS FOR THE FINANCIAL PLANNER BASED ON THE CLIENT’S OBJECTIVES
For all objectives, it is crucial to complete the Client Profile.
Objective: Evaluate the cost of living
Steps Reference
Determination of cost of living Module 4, Annexe 2, Section
16.1.6, 16.1.6A, Annexe 2
Draw up a budget Module 4, Section 16.1.6A,
Annexe 2 • Does the budget situation generate savings or a deficit?
• Is there an emergency fund?
• Is the amount of the emergency fund adequate?
• Are the cash holdings adequate?
• Is the line of credit used?
Objective: Eliminate personal debts
Steps Reference
Credit management Module 4 – Chapter 17 • Does the client have loans with interest that is not tax‐
deductible?
• What are the interest rates and maturities of the various
debts contracted by the client?
• Does the current level of loans compromise the client’s
short‐, medium‐ or long‐term financial viability?
• Is debt used effectively?
• Can the debts be repaid without penalty?
Objective: Review the investment strategy
Steps Reference
Target asset allocation based on answers obtained from
investor profile questionnaire
Module 6 – Chapter 1
Determine current asset allocation • What is the rate of return generated by the RRSP and non‐
registered portfolios?
• What is the rate of return generated by the income‐
producing assets?
• Is the investment portfolio diversified?
• Is the investment portfolio structured to minimize income
taxes?
• What is the fee structure of the portfolio?
• Is the “growth” portion of the portfolio protected against a
market crash?
Module 1 – Section 5.5.2
Module 6 – Chapters 2 and 4
INSTITUT QUÉBÉCOIS DE PLANIFICATION FINANCIÈRE 20
RISK TOLERANCE QUESTIONNAIRE
Based on the work of university researcher and certified financial planner John Grable, Ph.D., and Ruth
H. Lytton, Ph.D., this survey was developed after many years of examining dozens of risk evaluation
methods and administering tests to over a thousand participants. The researchers combined the most
effective questions to create the thirteen below. The score is explained at the end of the survey.
1. In general, how would your best friend describe you as a risk taker?
a) A real gambler
b) Willing to take risks after completing adequate research
c) Cautious d) A real risk avoider
2. You are on a TV game show and can choose one of the following. Which would you take?
a) $1,000 in cash b) 50% chance at winning $5,000 c) A 25% chance at winning $10,000 d) A 5% chance at winning $100,000
3. You have just finished saving for a “once‐in‐a‐lifetime” vacation. Three weeks before you plan to
leave, you lose your job. You would:
a) Cancel the vacation
b) Take a much more modest vacation
c) Go as scheduled, reasoning that you need the time to prepare for a job search
d) Extend your vacation, because this might be your last chance to go first‐class
4. If you unexpectedly received $20,000 to invest, what would you do??
a) Deposit it in a bank account, money market account, or an insured CD?
b) Invest it in safe high‐quality bonds or bond mutual funds
c) Invest it in stocks or stock mutual funds
5. In terms of experience, how comfortable are you investing in stocks or stock mutual funds?
a) Not at all comfortable
b) Somewhat comfortable
c) Very comfortable
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6. When you think of the word “risk,” which of the following words comes to mind first?
a) Loss
b) Uncertainty
c) Opportunity
d) Thrill
7. Some experts are predicting prices of assets such as gold, jewels, collectibles, and real estate (hard
assets) to increase in value; bond prices may fall, however, experts tend to agree that government
bonds are relatively safe. Most of your investment assets are now in high interest government bonds.
What would you do?
a) Hold the bonds
b) Sell the bonds, put half the proceeds into money market accounts, and the other half into hard
assets
c) Sell the bonds and put the total proceeds into hard assets
d) Sell the bonds, put all the money into hard assets, and borrow additional money to buy more
8. Given the best and worst case returns of the four investment choices below, which would you prefer?
a) $200 gain best case; $0 gain/loss worst case b) $800 gain best case; $200 loss worst case c) $2,600 gain best case; $800 loss worst case d) $4,800 gain best case; $2,400 loss worst case
9. In addition to whatever you own, you have been given $1,000. You are now asked to choose
between:
a) A sure gain of $500
b) A 50% chance to gain $1,000 and a 50% chance to gain nothing
10. In addition to whatever you own, you have been given $2,000. You are now asked to choose between:
a) sure loss of $500
b) A 50% chance to lose $1,000 and a 50% chance to lose nothing
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11. Suppose a relative left you an inheritance of $100,000, stipulating in the will that you invest ALL the money in ONE of the following choices. Which one would you select?
a) A savings account or money market mutual fund
b) A mutual fund that owns stocks and bonds
c) A portfolio of 15 common stocks
d) Commodities like gold, silver, and oil
12. If you had to invest $20,000, which of the following investment choices would you find most
appealing?
a) 60% in low‐risk investments 30% in medium‐risk investments 10% in high‐risk investments
b) 30% in low‐risk investments 40% in medium‐risk investments 30% in high‐risk investments
c) 10% in low‐risk investments 40% in medium‐risk investments 50% in high‐risk investments
13. Your trusted friend and neighbor, an experienced geologist, is putting together a group of investors to fund an exploratory gold mining venture. The venture could pay back 50 to 100 times the investment
if successful. If the mine is a bust, the entire investment is worthless. Your friend estimates the chance
of success is only 20%. If you had the money, how much would you invest?
a) Nothing b) One month’s salary
c) Three month’s salary
d) Six month’s salary
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SCORING
1. a = 4; b = 3; c = 2; d = 1 6. a = 1; b = 2; c = 3; d = 4 10. a = 1; b = 3
2. a = 1; b = 2; c = 3; d = 4 7. a = 1; b = 2; c = 3; d = 4 11. a = 1; b = 2; c = 3; d = 4
3. a = 1; b = 2; c = 3; d = 4 8. a = 1; b = 2; c = 3; d = 4 12. a = 1; b = 2; c = 3
4. a = 1; b = 2; c = 3 9. a = 1; b = 3 13. a = 1; b = 2; c = 3; d = 4
5. a = 1; b = 2; c = 3
According to John Grable: “Average and mean scores were relatively constant over time, ranging from 25
to 27 after addition.” Even though it is not an official scoring system, it appears that the following scores
are reliable with regard to risk tolerance:
18 or less = Low
19 to 22 = Below average
23 to 28 = Average or moderate
29 to 32 = Above average
33 and over = High
Source: J.E. Grable and R. H. Lyton, “Financial Risk Tolerance Revisited: The Development of a Risk
Assessment Instrument,” (1999) 8 Financial Services Review 163. Reproduced with permission.
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For the purposes of applying John Grable’s risk tolerance measure, the following chart was developed by
the IQPF to convert the score to a target asset allocation.
Score Fixed income Growth shares
10 or under 100% 0%
11 to 15 80% 20%
16 to 18 70% 30%
19 to 22 60% 40%
23 to 28 50% 50%
29 to 32 40% 60%
33 and over 30% 70%
This conversion grid is not to establish the allocation in an investment portfolio for a specific investment
objective. Rather, it establishes the asset allocation that will determine the return to use in the
framework defined by the IQPF long‐term projection assumptions with the objective of evaluating a
client’s financial needs. Of course, a conversion grid cannot replace thorough knowledge of the client.
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TAX SITUATION
OBJECTIVES
Yes No Comments
Reduce income taxes
Optimize after‐tax investment income
Use income splitting strategies
Evaluate compensation method
Evaluate business structure
Other
DOCUMENTS
Original Copy Comments
Tax returns for last three years
Business tax returns for last three years
Notice of assessment for client and business
Company’s financial statements
Investment statements
SERVICE CONTRACT
After our meeting, we will analyse the outlined objectives and develop an action plan. If necessary, we
will formulate recommendations related to the selected objectives. Only the objectives identified above
will be analysed.
Our responsibility is limited by the documentation and information provided. Our recommendations will
be based on certain assumptions and will have to be reviewed from time to time to reflect your changing
social and family situation, changes to tax and other laws, and the fluctuations of the economy and the
financial markets over time. The fee for the present contract will be $______.
Does the client participate to a pension plan, registered pension plan,
group RRSP, DPSP, supplemental pension plan, stock option plan, etc.?
Does the client always contribute the annual maximum to an RRSP or
spousal RRSP?
If not, how much does the client contribute each year?
____________________________________________
When does the client make the RRSP or spousal RRSP contributions?
End of the year
Beginning of the year
Systematic savings program
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POINTS OF ANALYSIS FOR THE FINANCIAL PLANNER BASED ON THE CLIENT’S OBJECTIVES
For all objectives, it is crucial to:
1. Complete the Client Profile 2. Determine the Investor Profile 3. Use economic and demographic assumptions based on the IQPF Projection Assumption Standards
Objective: Determine savings required or feasibility of retirement objective
Steps Reference
Determine or confirm cost of living Module 7 – Section 3.2.3
Identify sources of income • QPP
• OAS, GIS, EI
• Defined contribution pension plan
• Defined benefit pension plan
• RRSP or RRIF
• LIRA or Locked‐in RRSP or LIF
Module 7 – Section 4.2
Module 7 – Section 4.3
Module 7 – Section 5.4.4
Module 7 – Section 5.4.5
Module 7 – Chapter 6
Module 7 – Section 5.7
Determine savings required Module 1 – Annexe of Annexe 1
Objective: Evaluate RRSP, RRIF and annuity payout options
Steps Reference
Determine or confirm cost of living Module 7 – Section 3.2.3
Evaluate various payout options Module 7 – Section 6.6
Objective: Choose between a defined benefit pension plan and transfer to a LIRA
Steps Reference
Calculate or confirm the transfer value Module 4 – Chapter 12
Module 7 – Section 5.4.9
Determine level of risk tolerance Investor Profile
Analyse options Module 7 – Section 5.10.2
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Objective: Set up an individual pension plan (IPP)
Steps Reference
Assess advantages and disadvantages of an IPP Module 7 – Section 5.14
Evaluate set‐up criteria Module 7 – Section 5.14
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ESTATE PLANNING SITUATION
OBJECTIVES
Yes No Comments
Draw up or review the will
Minimize taxes payable on death
Determine life insurance needs
• Maintain current standard of living for heirs
• Provide additional legacies to heirs
• Arrange other legacies, such as to a foundation
Business: safeguard business continuation after death
Other ________________________________
DOCUMENTS
Original Copy Comments
Will
Marriage contract
Individual life insurance contracts
Group insurance brochure
Tax returns for last three years
Business tax returns for last three years
Financial statements of the business
Shareholders agreement
Other ________________________________
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SERVICE CONTRACT
After our meeting, we will analyse the outlined objectives and develop an action plan. If necessary, we
will formulate recommendations related to the selected objectives. Only the objectives identified above
will be analysed.
Our responsibility is limited by the documentation and information provided. Our recommendations will
be based on certain assumptions and will have to be reviewed from time to time to reflect your changing
social and family situation, changes to tax and other laws, and the fluctuations of the economy and the
financial markets over time. The fee for the present contract will be $______.