CISI Chartered Wealth Manager Programme Applied Wealth Management

CISI Chartered Wealth Manager Programme Applied Wealth Management – Day 4 Cris Glascow Accredited Training Partner

Objectives By the end of the workshop you will have: q Revised learning outcomes 7 and 8 q Practised exam type questions q Identified areas you need to read about more thoroughly q Devised an action plan. Accredited Training Partner

Agenda q Module 7 q Module 8 q Review. Accredited Training Partner

Module 7 – Using Collectives and Fund Research Accredited Training Partner

Indirect Investments Exercise q Complete the answers to the multiple choice and multiple option answer quiz Handout 1 Accredited Training Partner

Hedge Funds Exercise Complete the answers to the questions on hedge funds Handout 2 Accredited Training Partner

Structured Products Pre packaged product typically guaranteeing to protect the investor’s principal capital investment if held to maturity and also allowing the investor benefit from any market rise Cash / Discounted Bond Safety of capital + Derivative (often option) Prospect of gain Accredited Training Partner

Structured Investment Products Structured Product examples q Capital protected q Minimum returns q Digital q Straddle q Cliquet q Kick out q Accelerated q Reverse convertible. Accredited Training Partner

Structured Investment Products Advantages: q Protection to some or all of capital q Opportunity for enhanced returns q Diversification within portfolio q Some structured products can be held within a tax free wrapper e. g. SIPP or NISA q Can give exposure to a range of underlying assets, e. g. overseas indices, commodities. Accredited Training Partner

Structured Investment Products Disadvantages: q Credit risk (unsecured debt of banks – capital guarantees are only as strong as the strength of the underlying provider – Lehmans? ) q Not always covered by the FSCS q FCA suitability assessment – not suitable for investors who do not want to risk their capital q Often require investors to lock up capital for minimum period, e. g. 5 years q Minimum investments will apply which may be high. Accredited Training Partner

Structured Investment Products Disadvantages: q Capital protection often only applies if the investment is held until maturity q Performance is often linked to volatile assets such as indices q Rarely trade after issue – early surrender will result in loss against purchase price q Pricing – difficult to value q Can be poor value – returns linked to the rate of return on the cash / bond, the cost of the option and the management charge. Often criticised on basis that performance is often below that of investing directly in the market q Complex instruments. Accredited Training Partner

Module 8 – Life Assurance Products Accredited Training Partner

Life Assurance Products Key Terminology q Life office / insurer q Insurable interest q Proposer / assured q Sum assured q Life assured q Own life / life of another q Joint life first / second death q Loadings. Accredited Training Partner

Life Assurance Products - Product Identification Exercise From the case study scenarios attached, recommend an appropriate product to meet client needs in each scenario. Justify your recommendations. Handout 3 Accredited Training Partner

Life Assurance Products Investment Bonds q Unit-linked bonds q Distribution bonds q With profit bonds q Guaranteed growth bonds q Guaranteed income bonds q Guaranteed equity bonds. Handout 4 Accredited Training Partner

Life Assurance Products Annuities “A lump sum investment with a financial institution that provides a regular periodic payment to an individual for a specified period of time” q Duration - life or specified period, immediate or deferred q Regular payments - fixed or variable q Pooling of individual funds. Accredited Training Partner

How Are Annuity Rates Calculated? (1) Each instalment of an annuity can be considered to be made up of three parts: q A share of the original purchase price q An element of investment return, based on the gilt (or other investment) yield underlining the annuity rate q A share of the assumed mortality profit released by earlier deaths of other policyholders. Accredited Training Partner

How Are Annuity Rates Calculated (2) Rates will also depend on type of annuity: q Immediate annuity q Deferred annuity q Temporary annuity q Annuity certain. Accredited Training Partner

Selection of Annuity Options q. Payment frequency q. Advance/arrears (if in arrears with/without proportion) q. Guaranteed q. Joint life and last survivor q. Escalation q. Capital protection q. Flexible payments. Accredited Training Partner

Investment Linked Annuities q With-profits q Unit-linked. Accredited Training Partner

Enhanced And Impaired Life Annuities Enhanced q Higher rates for particular conditions or lifestyles e. g. smokers, overweight, diabetes etc. Impaired life q For those with serious medical conditions usually related to much higher risk of early mortality q Often fully underwritten perhaps involving a medical examination and details of medical history. Accredited Training Partner

Taxation of Annuities q Purchased life annuities q Purchased annuities certain q Pension annuities q Deferred annuities q Annuities for beneficiaries under trusts or wills. Accredited Training Partner

Advantages and Disadvantages of Choosing an Annuity Advantages q Certainty of payment q Low investment risk q Inclusion of options to accommodate differing needs Disadvantages q Inflexible q Illiquid. Accredited Training Partner

Alternatives to an Annuity Pension based plans q Scheme pension q Unsecured pension - drawdown or through short-term annuities. Non pension based plans q Direct investment to assets such as cash, bonds, equities, property or collectives. Accredited Training Partner

Health Insurance Key features of: q Income Protection Insurance q Critical Illness cover q Private Medical Insurance q MPPI and ASU cover q Long-term care cover Handout 5 Accredited Training Partner

Day 4 Review q Review slides and exercises against syllabus q Check areas of understanding questions for next session q Assess past exam reports for questions on syllabus areas covered. Accredited Training Partner