Applied Financ ial Advice an

nd Managem
ment

CH
HARTE
ERED INSTIT
TUTE FOR SECUR
RITIES
S&
INVEESTM
MENT

LEVEL 4

INTER
RNAT
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AL CE
ERTIFIICATE
E IN A DVA
ANCED
D
WEAL
LTH MANA
AGEM
MENT:
APPPLIED FINA
ANCIA
AL ADV
VICE AND
MANA
AGEM
MENT

EFFECTTIVE FR
ROM 21
2 JULY 20144

Charterred Institute ffor Securities

s & Investme
ent

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International Certificate in Wealth & Investment Management (Level 4)

OBJECTIVE OF THE EXAMINATION

The object of the examination is to ensure that candidates demonstrate the ability to apply the knowledge,
theory and practical techniques required in order to assess a clients current financial position and future
requirements, make suitable investment recommendations, monitor performance and respond
appropriately to changing needs and circumstances.
The examination will test candidates ability to apply knowledge and understanding of the following
elements:

The macro-economic context of investment advice and planning

The main asset classes; characteristics and applications
The main investment products; characteristics and applications
Identification, measurement and assessment of investment risks and returns
Portfolio planning, construction, review and maintenance
Provision of investment advice including the ability to analyse clients circumstances and apply
suitable investment product recommendations to meet client-led objectives

SYLLABUS STRUCTURE
The unit is divided into elements. These are broken down into a series of learning objectives.
Each learning objective begins with one of the following prefixes: know, understand, be able to
calculate, be able to apply, be able to analyse, be able to assess or be able to interpret. These
words indicate the different levels of skill to be tested. Learning objectives prefixed:
know require the candidate to recall information such as facts, rules and principles
understand require the candidate to demonstrate comprehension of an issue, fact, rule or
principle
calculate require the candidate to be able to use formulae to perform calculations
apply require the candidate to be able to apply their knowledge to a given set of circumstances
in order to present a clear and detailed explanation of a situation, rule or principle
analyse require the candidate to review the information content in detail and draw conclusions
assess require the candidate to review the information content and to make an informed
judgement
interpret require the candidate to review the information content and extract meaning from it
CANDIDATE UPDATE
Candidates are reminded to check the Candidate Update area of the Institutes website (www.cisi.org.)
on a regular basis for updates that could affect their examination as a result of industry change.

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EXAMINATION SPECIFICATION
Each examination paper is constructed from a specification that determines the weightings that will be
given to each element. The specification is given below.
It is important to note that the numbers quoted may vary slightly from examination to examination as there
is some flexibility to ensure that each examination has a consistent level of difficulty. However, the
number of questions tested in each element should not change by more than plus or minus 2.

Examination specification
80 multiple choice questions
Element
number
1
2
3
4
5
6
7

Element

Questions

Cash and Money Markets

Bonds
Equities
Other Investments
Collective Investments
Financial Advice
Portfolio Management

4
13
13
11
12
13
14
Total

80

ASSESSMENT STRUCTURE
A 2 hour examination of 80 Comprehension multiple questions
Candidates sitting the exam by Computer Based Testing will have, in addition, up to 10% of additional
questions as trial questions that will not be separately identified and do not contribute to the result.
Candidates will be given proportionately more time to complete the test.

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SUMMARY SYLLABUS
Element 1 Cash and Money Markets
1.1 Cash Deposits
1.2 Money Market Funds
Element 2 Bonds
2.1
Characteristics and Types of Bonds
2.2
Risk and Return
2.3
Bond Analysis
Element 3 Equities
3.1
Characteristics and Types of Equities
3.2
Risk and Return
3.3
Equity Analysis
Element 4 Other Investments
4.1
Foreign Exchange
4.2
Property
4.3
Derivatives
Element 5 Collective Investments
5.1
Open ended Funds
5.2
Exchange Traded Funds
5.3
Closed ended Funds
5.4
Life Assurance based investments
5.5
Alternative Investments
5.6
Fund selection and fund provider research
Element 6 Financial Advice
6.1
Investment Advice Process
6.2
International Considerations
6.3
Trusts and Foundations
Element 7 Portfolio Management
7.1
Risk and Return
7.2
Asset Allocation
7.3
Investment management
7.4
Evaluating investment performance

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Chartered Institute for Securities & Investment

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International Certificate in Wealth & Investment Management (Level 4)

ELEMENT 1 CASH AND MONEY MARKETS

1.1

Cash Deposits

On completion, the candidate should be able to:

1.1.1 Analyse the key features, risks and returns of cash deposits:
Types - types of account; foreign currency accounts
Characteristics - capital security; interest options
Returns - rates of interest; interest rate comparisons; effect of charges and penalties
Risks - default risk; deposit insurance; credit risk assessment; inflation risk; interest rate risk
1.1.2 Analyse the factors to take account of when selecting cash deposits:
access; security; liquidity; interest rates

1.2

Money Market Funds

On completion, the candidate should be able to:

1.2.1 Analyse the key features, risks and returns of money market funds:
Types - types of funds; constant and variable NAV
Characteristics - structure and operation; charges and tax; supervision; underlying investments
Returns - rates of interest
Risks - interest rate risk; credit risk; liquidity risk; credit ratings; use of weighted average maturity
and weighted average life
1.2.2 Analyse the factors to take account of when selecting money market funds:
uses of money market funds
selection criteria

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ELEMENT 2 BONDS
2.1

Characteristics and Types of Bonds

On completion, the candidate should be able to:

2.1.1 Understand the main purposes for issuing bonds and their key features:
Structures
Where issued
classifications
2.1.2 Analyse the main investment characteristics of the major government bond classes:
Issuers - supranationals; sovereign governments; public authorities: local government/
municipalities
Types - conventional; dual dated; undated; floating rate; zero Coupon; inflation protected
2.1.3 Analyse the main issuers of corporate debt and the main investment characteristics of secured and
unsecured debt:
Issuers and types of corporate bonds
Security - seniority; fixed and floating charges; impact of security; redemption provisions
Types of secured debt - debentures and secured debt; securitisation process and asset backed
and mortgage backed securities
Types of unsecured debt - income bonds; subordinated bonds; high yield; convertible bonds
2.1.4 Analyse the main investment characteristics, behaviours and risks of Eurobonds and foreign bonds:
Issuers - sovereign, supranational and corporate
Types of Eurobond - straight, FRN/ VRN, subordinated, asset backed, convertible
2.1.5 Understand the role, structure and characteristics of global corporate bond markets:
How bonds are issued and the main participants involved
Market structure - decentralised dealer markets; dealer provision of liquidity; bond pools of
liquidity; market supervision and regulation
Trading conventions - clean and dirty pricing; day count conventions; settlement

2.2

Risk and Return

On completion, the candidate should be able to:

2.2.1 Analyse the specific features of bonds from an investment perspective:
Coupons - coupon and payment date; floating rate coupons; other types of coupon
Redemption provisions - maturity date; embedded put or call options
Inflation protection - methods of index linking; impact on coupons and maturity payments; Return
during a period of zero inflation
Other characteristics - convertible bonds; exchangeable bonds
2.2.2 Analyse the risks associated with bonds and the role of credit rating agencies:
General risks
Market risks
Default risk

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2.3

Bond Analysis

On completion, the candidate should be able to:

2.3.1 Analyse fixed income securities using the following valuation measures, and understand the
benefits and limitations of using them:
Flat yield
Gross redemption yield (using internal rate of return)
Net redemption yield
Yield curves
2.3.2 Analyse the factors that influence bond pricing:
Relationship between interest rates and bond prices and how modified and Macaulay duration
are used
Yield to maturity; credit rating; impact of interest rates; market liquidity
2.3.3 Analyse sovereign, government and corporate credit ratings from an investment perspective:
Country rating factors; debt instrument rating factors; Use of credit enhancements
Investment & sub-investment grades; impact of grading changes
2.3.4 Understand how bond prices are calculated and the main methods of quotation:
differences in yield, spread and price quotation methods
spread over government bond benchmark
spread over/under LIBOR or other benchmark rate
spread over/under swap rates

ELEMENT 3 EQUITIES
3.1

Characteristics and Types of Equities

On completion, the candidate should be able to:

3.1.1 Analyse the investment characteristics of equities:
Types - ordinary and common shares; preference or preferred shares
Rights - dividends; voting; pre-emption
3.1.2 Analyse the characteristics of depositary receipts
Depositary receipts - types; issue process; rights to dividends and other events
Depositary receipts
Globally registered shares
3.1.3 Understand the role, structure and characteristics of equity markets:
How new equity issues are undertaken and the role of the participants
Order driven and quote driven markets
on-exchange and off-exchange trading
pre- and post-trading transparency
registration and safe custody
3.1.4 Understand the conventions of equity markets:
Trading conventions - settlement conventions; Delivery versus Payment; ex-dividend periods
Regulatory considerations - best execution; timely execution; allocation and aggregation; conflicts
of interest

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3.2

Risk and Return

On completion, the candidate should be able to:

3.2.1 Analyse the sources of return and the risks associated with equities, including:
Liquidation
Impact of market volatility
3.2.2 Analyse the impact of mandatory and voluntary corporate actions on equity holdings:
Income events - dividends; dividends with options
Capital events - bonus issues; stock splits; reverse stock splits
Capital raising events - rights issues; open offers; placings

3.3

Equity Analysis

On completion, the candidate should be able to:

3.3.1 Apply an understanding of legal requirements to prepare accounts and of the framework for
financial statements:
Responsibility for preparation and required information in accounts
Objectives and qualitative characteristics of financial statements
International financial reporting standards
Auditors reports
3.3.2 Understand the purpose, structure and content of financial statements produced under IFRS
3.3.3 Analyse equities using the following profitability, liquidity and gearing ratios:
Return on capital employed (ROCE); Asset turnover; Net profit margin; Gross profit margin;
Equity multiplier
Working capital (current) ratio; Liquidity ratio (acid test); Z score analysis
Financial gearing; Interest cover
3.3.4 Analyse equities using the following investor ratios:
Earnings per share (EPS)
Earnings before interest, tax, depreciation, and amortisation (EBITDA)
Earnings before interest and tax (EBIT)
Historic and prospective price earnings ratios (PERs)
Dividend yields and Dividend cover
Price to book ratio (P/B)
3.3.5 Apply the principles of the following investment valuation methods to the process of equity analysis:
Dividend valuation models
Earnings and asset valuation models
Shareholder valuation models

3.3.6 Understand the main challenges and limitations of performing financial analysis

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ELEMENT 4 OTHER INVESTMENTS

4.1

Foreign Exchange

On completion, the candidate should be able to:

4.1.1 Analyse the characteristics, risks and return of foreign exchange (FX) from an investment
perspective:
Basic structure and operation of the foreign exchange market
FX quotes - quoting conventions; currency pairs
Determinants of spot foreign exchange prices
4.1.2 Calculate forward exchange rates using:
premiums and discounts
interest rate parity
4.1.3 Understand the characteristics and pricing of FX futures, options and swaps
4.1.4 Apply an understanding of how FX transactions are used for:
Foreign currency cash management
Speculation
Hedging foreign currency exposure

4.1

Property

On completion, the candidate should be able to:

4.2.1 Understand the characteristics of the main types of direct and indirect property investments:
Sectors - residential; buy-to-let; commercial
Types - freehold; lease structures
Operation - conveyancing; costs; valuation finance and gearing
Investment funds - range of indirect investment vehicles available
4.2.2 Analyse the sources of risk and return associated with investing in property and property funds
Factors affecting returns - capital growth; yield; location and quality; occupancy rate; tenant
creditworthiness; term and structure of lease
Risks - liquidity; volatility; sector risk
4.2.3 Analyse property and property funds from an investment perspective
cash flow and average yield
capitalisation rate
rental value and review
reversionary value
investment performance measurement
role of Investment Property Databank

4.2

Derivatives

On completion, the candidate should be able to:

4.3.1 Understand the core concepts, terminology, characteristics and uses of:
Futures
Options
Swaps

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4.3.2 Apply an understanding of how derivatives strategies are used within portfolio management for the
purposes of:
Hedging
Immunization
Speculation
Rebalancing

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International Certificate in Wealth & Investment Management (Level 4)

ELEMENT 5

COLLECTIVE INVESTMENTS

On completion, the candidate should be able to:

5.1

Open ended Funds

5.1.1 Analyse the key features, risks and returns of open ended funds:
Types; characteristics; pricing; dealing
5.1.2 Analyse the factors to take account of when selecting Open ended Funds:
fund size; risk rating; total expense ratio; portfolio turnover; liquidity; counterparty risk

5.2

Exchange Traded Funds

5.2.1 Analyse the key features, risks and returns of exchange traded funds:
Types; characteristics; pricing; dealing
5.2.2 Analyse the factors to take account of when selecting funds:
replication methodology; counterparty risk; liquidity; costs

5.3

Closed ended Funds

5.3.1 Analyse the key features, risks and returns of closed ended funds:
Types; characteristics; pricing; dealing.
Specialist funds - private equity; infrastructure; project finance; forestry
5.3.2 Analyse the factors to take account of when selecting closed ended funds:
discounts and premiums; gearing; liquidity; fund size; total expense ratio; portfolio turnover;
counterparty risk

5.4

Life Assurance based investments

5.4.1 Analyse the key features, risks and returns of life assurance based investments:
Insurance vs assurance
Types: insurance policies; insurance bonds; unit-linked insurance products
5.4.2 Analyse the relative merits and limitations of investing in life assurance based investments
compared with other forms of direct and indirect investment
Taxation of insurance-based investments
Uses in investment, financial protection, retirement and pension planning

5.5

Alternative Investment Funds

5.5.1 Understand the key features of Hedge Funds:

Types of hedge funds
Investment strategies

Use of short and long positions

5.5.2 Analyse the factors to take account of when investing in Hedge Funds compared with other forms of
direct and indirect investment
Sources of risk and return
Due diligence

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5.5.3 Analyse the key features, relative merits and limitations of investing in the following alternative
investment funds compared with other forms of direct and indirect investment:

Absolute return funds

Structured products

Commodities and commodity funds

5.6

Fund selection and fund provider research

5.6.1 Understand the range of research available for mutual funds and their relative merits and limitations
in the fund selection process

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ELEMENT 6

FINANCIAL ADVICE

On completion, the candidate should be able to:

6.1

Investment Advice Process

6.1.1 Apply fundamental principles of financial planning to wealth management scenarios:

Structured advice process; gathering client information; risk assessment
6.1.2 Understand the key principles of behavioural finance and its impact on attitude to risk
6.1.3 Advise on investment objectives; constraints, investment strategy and suitability criteria
6.1.4 Analyse a clients financial position; asset and cash flow projections
6.1.5 Understand the main considerations that should be taken into account when developing investment
strategies for:
Trusts and charities
Ethical and socially responsible investment
Shariaa and other faith based values
6.1.6 Understand the use and importance of investor policy statements and the range of investment
solutions available for wealth management clients:
Investment policy statements
Investment solutions - wraps and other platforms; multi asset funds and target date funds;
discretionary portfolio management

6.2

International Considerations

On completion, the candidate should be able to:

6.2.1 Understand the concept of domicile and its impact on international wealth management:
Types of domicile
Impact of domicile on tax
Succession issues
6.2.2 Understand the concept of residency and its impact on taxation issues in international wealth
management:
Meaning of residency
Worldwide versus territorial tax systems
Impact on liability to tax
Double taxation treaties and withholding taxes
6.2.3 Understand how the increase in international tax transparency policies impact on international
wealth management:
Tax avoidance versus tax evasion
Tax information sharing; EU Savings Directive; US Qualified Intermediaries; FATCA

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6.3

Trusts and Foundations

On completion, the candidate should be able to:

6.3.1 Understand the fundamentals of trusts and their use in international wealth management:
Types of trusts - definition; fixed interest; discretionary trusts; other types
Establishing a trust - certainties; role of parties
Uses of trusts - main uses; types of assets held; sham trusts
Private trust companies
6.3.2 Understand the fundamentals of foundations and their use in international wealth management:
Types of foundations - private; corporate; charitable; special purpose
Establishing a foundation - charter; role of founder, foundation council and other parties
Uses of foundations - types of assets held; restrictions on commercial activities; international
business companies
6.3.3 Understand the essential differences between trusts and foundations and be able to distinguish
them for other legal concepts
6.3.4 Understand how offshore trusts are used for money laundering and steps that should be taken to
counter threats

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Element 7
7.1

Portfolio Management

Risk and Return

On completion, the candidate should be able to:

7.1.1 Understand the sources of return sought by investors and how these can be compromised by
various risks:
Returns - types of investment return and related investment objectives
Risks market, credit, liquidity, concentration and systemic
7.1.2 Analyse the effects of volatility and correlation on investments and asset classes:
Volatility of returns: data distribution
Standard deviation
Positive, negative, zero and cross-correlation

7.2

Asset Allocation

On completion, the candidate should be able to:

7.2.1 Understand the main principles of portfolio construction theory and the need for diversification:
Modern Portfolio Theory
Capital Asset Pricing Model
Efficient Markets Hypothesis
7.2.2 Analyse the key approaches to investment allocation for bond, equity and balanced portfolios,
including an appreciation of their limitations:

Strategic asset allocation - factors influencing strategic allocation decisions; selection of

benchmark; model portfolios
Tactical asset allocation - impact of market timing decisions on asset allocation
7.2.3 Analyse the impact of economic, financial and stock market cycles on the investment process:
trade cycles
business cycles
asset price bubbles
economic shocks
difficulty in forecasting national and international trends
7.2.4 Understand key economic and business indicators from an investment perspective:
Gross Domestic Product
Interest rates
Consumer price & inflation indices
Unemployment rate
Stock market and foreign exchange indices
Money supply changes
Leading, lagging and coincident indicators
Pro cyclic, counter cyclic and acyclic indicators
7.2.5 Analyse the impact of economic trends and indicators on asset classes and sector allocation

7.3

Investment management

On completion, the candidate should be able to:

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7.3.1 Analyse the main cash, bond and equity portfolio management strategies and their short and longer
term implications for investors:
Cash management
Active and passive equity management strategies
Active and passive bond strategies
Alternative investment exposure
Core- Satellite asset allocation

7.3.2 Understand the purpose and concept of benchmarking, the range of weighting methods used in
index construction, and the range of published indices available
7.3.3 Understand the main factors influencing the selection or construction of appropriate benchmarks for
wealth management clients
7.3.4 Apply an investment strategy for a wealth management client from the perspective of:
Investment objectives
Risk appetite
Tax situation
Total expense ratio (TER) and level of portfolio turnover (PTR)
Suitability requirements
Benchmarking
Liquidity and timing factors where asset accumulation and decumulation are relevant features
7.3.5 Understand the responsibilities of managing a client portfolio including:

7.4

Monitoring and rebalancing the portfolio in light of market developments

Developing recommendations for ongoing investment purposes
Reviewing and reporting on investment strategy and performance
Regular and periodic communication with the client
Changes in client circumstances
Efficient administrative support

Evaluating investment performance

On completion, the candidate should be able to:

7.4.1 Calculate the main measures used in evaluating investment performance, and know how they are
applied:
Holding period return
MWRR and TWRR
Risk adjusted returns - Sharpe ratio; Treynor ratio; Jensen ratio; Information Ratio
7.4.2 Analyse portfolio performance in terms of:
Risk adjusted returns
Contributions to return arising from asset allocation, currency movements, stock selection and
timing

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