ICWIM Exam Dumps - CISI level 3 Certificate in Wealth & Investment Management Questions and Answers

Private Equity and Growing Companies:

Private equity involves investing in privately-held companies with the goal of increasing their value and exiting through a stock market listing (IPO) or sale.

This investment type targets growth-stage businesses requiring significant capital.

Elimination of Other Options:

A: Convertible bonds are debt instruments, not equity investments.

B: Preference shares provide fixed dividends and are not growth-oriented investments.

D: Structured products are financial instruments tied to underlying assets and not specific to growth financing.

An open-ended fund can create or cancel units based on investor demand.

Liquidity: Open-ended funds, such as Unit Trusts and OEICs (Open-Ended Investment Companies), continuously issue and redeem shares.

Pricing: The price is based on the Net Asset Value (NAV).

Flexibility: The fund manager can adjust the fund size by issuing or cancelling units.

???? Reference: FCA Handbook, CISI Wealth & Investment Management (Fund Structures).

An order-driven market relies on an electronic order book to match buy and sell orders based purely on price and time priority.

Example: The London Stock Exchange (LSE) uses SETS (Stock Exchange Electronic Trading Service) for order-driven trading.

Key Features:

Buyers and sellers place limit orders and market orders.

No market makers—orders are matched electronically.

Used for high-liquidity securities.

???? Reference: LSE Trading Mechanisms, CISI Wealth & Investment Management.

Purpose of the FATF:

Established in 1989, the FATF develops global policies to combat money laundering and terrorist financing.

It promotes international standards to ensure financial systems are not misused for criminal purposes.

Elimination of Other Options:

A: The FATF’s mandate is broader than G7 financial regulation.

B: It provides guidance but does not solely focus on developing financial regulation.

C: Ending safe havens for corrupt funds is part of its mission but secondary to its primary goal of combating money laundering and terrorism.

For a 32-year-old self-employed client with three young dependants, the most immediate financial vulnerability is loss of earned income. Unlike many employees, self-employed individuals often have limited employer-provided sick pay and fewer workplace benefits. If illness or injury prevents them from working, household expenditure still continues, and the family may rely heavily on that income to meet essential outgoings such as mortgage or rent, utilities, and childcare. Therefore, sickness cover, commonly delivered through income protection, is typically a high priority because it aims to replace a proportion of earnings if the client cannot work due to incapacity. Long-term care cover is generally a later-life planning issue and is unlikely to be the top priority at age 32. Inheritance tax cover may be relevant for high-net-worth estate planning, but it is not usually the first protection need for a young family unless there are clear IHT exposures. Key person cover is a business protection policy designed to protect the firm, not the family’s personal cashflow, so it is not normally the highest personal priority in this fact pattern.

Synthetic replication uses derivative contracts (swaps) to track an index without directly holding the underlying assets.

Why is Option C Correct?

The fund manager enters into a swap agreement with an investment bank.

The bank provides the return of the target index, while the fund pays a fixed rate or cash return.

This is common for emerging markets or illiquid assets, where direct replication is difficult.

Why Not Other Options?

A (Full replication) → Buys all index components, no swaps used.

B (Stratified sampling) → Buys representative index samples, no swaps.

D (Optimisation) → Uses mathematical models to track an index, no swaps.

???? Reference: CFA Institute (Index Replication Strategies), CISI Wealth & Investment Management.

Earnings per share (EPS) measures profitability per share. A higher EPS means a company has more earnings available for dividends or reinvestment.

Why is Option B Correct?

An increase in EPS improves the company’s ability to pay dividends, as there are more profits available per share.

Why Not Other Options?

A (Share base widened) → EPS is based on net income, not share count.

C (Market share risen) → Higher EPS does not mean higher revenue or market share.

D (P/E ratio increased) → The P/E ratio depends on share price movements, not just EPS.

???? Reference: CFA Institute (Earnings Analysis), CISI Wealth & Investment Management.

Disguising criminal property falls within the core money laundering offences associated with concealing the origins or nature of illicit assets. Concealing covers conduct such as hiding, disguising, converting, transferring, or removing criminal property to make it appear legitimate or to prevent its detection, seizure, or confiscation. The key feature is dealing with the property in a way that obscures its true source, ownership, location, or movement. Failure to disclose is a separate offence that applies when a person in the regulated sector does not report knowledge or suspicion of money laundering to the appropriate internal or external reporting channel. Tipping off relates to informing a person that a report has been made or that an investigation is underway, potentially prejudicing an investigation. Arrangements refers to becoming involved in an arrangement which facilitates the acquisition, retention, use, or control of criminal property by or on behalf of another person. Because the question focuses specifically on disguising criminal property, the clearest and most direct offence is concealing.

A residence-based worldwide tax system taxes individuals based on their tax residence status, not the geographical source of their income. If a person is resident for tax purposes, they are generally liable to tax on their worldwide income and gains, meaning income from employment, savings, dividends, rental income, and capital gains can be within scope even if those amounts arise overseas. This contrasts with a source-based approach, where only domestic income and gains are taxed. The exam distinction is therefore about what triggers liability and what is included: residence triggers liability, and worldwide income and gains are included. Option A is incorrect because the system is not indifferent to where an individual resides; residence is the key determinant. Option C describes a source-based system. Option D is unrelated to the concept and is a trap that confuses immigration or border movement with tax residence. In suitability and planning questions, this concept matters because residence status affects how overseas investments, offshore accounts, and international employment income may be taxed, and it influences reporting obligations and cross-border planning considerations.

When a client has multiple competing needs, the adviser’s role is to support informed decision-making by helping the client clarify objectives and prioritise. Competing needs commonly involve trade-offs, such as paying down debt versus investing, protecting family income versus saving for retirement, or building liquidity versus growth. The adviser should explore the client’s goals, time horizons, urgency, affordability, and consequences of underfunding each need. This prioritisation should also reflect capacity for loss, existing protections, and any dependencies, so that the most critical risks are addressed first. Recommending the cheapest product is not suitable because product price does not determine whether the client’s needs are met appropriately. Seeking a second opinion is unnecessary if the adviser is competent and the issue is prioritisation rather than technical uncertainty. Conducting a fresh fact find is also not the correct default response; the fact find has already identified the needs, so the next step is to agree priorities and create a staged plan. The examinable principle is client-led prioritisation supported by adviser analysis.