ICWIM Exam Dumps - International Certificate in Wealth & Investment Management

What is an Accumulation and Maintenance Trust?

This is a trust designed primarily for minors or young beneficiaries.

Trustees have discretion over income and capital distributionsuntil a specified event or age, after which the discretion typically ceases.

When Does Discretion Cease?

Generally, trustees' discretion ends at theend of a prescribed periodor when the beneficiary reaches a predetermined age, often 18 or 25.

This ensures the trust complies with legal requirements, such as therule against perpetuitiesin some jurisdictions.

ICWIM Study Guide, Chapter on Trusts: Details the rules around accumulation and maintenance trusts.

Trust Law Principles: Highlights limitations of trustee discretion.

References

Determine the shortfall in income:

Desired income: £40,000

Pension provided: £35,000

Annual shortfall: £40,000 - £35,000 = £5,000

Adjust for inflation over 20 years:Future value = Present Value × (1 + Inflation Rate)^n£5,000 × (1 + 0.02)^20 = £7,430 (inflation-adjusted shortfall)

Calculate the lump sum required to generate this shortfall:Use the real rate of return formula: (1 + nominal return) ÷ (1 + inflation rate) - 1Real rate of return = (1 + 0.03) ÷ (1 + 0.02) - 1 = 0.98% per year

Use the present value of annuity formula:PV = PMT × [(1 - (1 + r)^-n) ÷ r]PV = £7,430 × [(1 - (1 + 0.0098)^-20) ÷ 0.0098]PV = £7,430 × 44.64 = £331,631

Know Your Customer (KYC)

A regulatory process requiring firms to collect sufficient information about a client to ensure advice is appropriate.

It involves understanding the client’s financial situation, goals, and risk tolerance.

Why the Answer is D

Establishing sufficient client details is the essence of KYC. It ensures compliance with regulations and prevents mis-selling.

Why Other Options are Incorrect

A. Suitability and affordability: Part of KYC but does not encompass all aspects.

B. Attitude to risk: A component of KYC but not the full procedure.

C. Status disclosure: Refers to informing the client about the advisor’s regulatory status, not client profiling.

ICWIM Study Guide, Chapter on Regulatory Compliance: Details KYC as a cornerstone of financial advice.

FCA Guidelines: KYC is a mandatory process in the UK’s financial services.

ReferencesThus, the correct answer isD. Following know your customer procedures.

Standard deviation measures the dispersion of returns around the average (mean) return. A higher standard deviation indicates greater historical volatility, showing how much the returns deviate from the expected average.

Formula:

Standard Deviation=Σ(Ri−Rˉ)2n\text{Standard Deviation} = \sqrt{\frac{\Sigma (R_i - \bar{R})^2}{n}}Standard Deviation=nΣ(Ri​−Rˉ)2​​

Where:

RiR_iRi​ = Individual returns

Rˉ\bar{R}Rˉ = Mean return

nnn = Number of data points

Price of Closed-Ended Investment Companies:

These companies issue a fixed number of shares. Prices can trade at a premium or discount to NAV based on market demand and supply for their shares.

Strong demand increases prices above NAV (premium), while weak demand decreases prices below NAV (discount).

Elimination of Other Options:

A: Charges affect long-term returns but not immediate pricing.

B: Tax status is generally consistent and not a determinant of premiums or discounts.

D: Interest rates indirectly affect demand but are not a direct cause.

References:

ICWIM Module 3: Discussion on pricing mechanisms of closed-ended funds and NAV premiums/discounts.