NISM Certifications Investment Advisory and Wealth Management Syllabus

Investment Advisory and Wealth Management syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Investment Advisory and Wealth Management in NISM Certifications, not a summary of it.

1. 1

   Investment Advisory Framework

   3 topics

   • SEBI (Investment Advisers) Regulations, 2013
     • Registration and eligibility criteria
     • Separation of advisory and distribution
     • Fee structure and disclosures
   • Fiduciary Responsibility and Suitability
     • Duty of care and best interest
     • Conflict of interest management
     • Risk profiling obligations
   • Advisory Process and Documentation
     • Client agreement and onboarding
     • Record-keeping requirements
2. 2

   Personal Financial Planning

   4 topics

   • Financial Planning Process
     • Establishing goals and data gathering
     • Cash flow and net worth analysis
     • Plan implementation and review
   • Time Value of Money
     • Present and future value
     • Annuities and perpetuities
     • Inflation-adjusted returns
   • Goal-Based Planning
     • Retirement planning
     • Education and child planning
     • Emergency fund planning
   • Insurance and Risk Management
     • Life and health insurance needs
     • Human life value approach
3. 3

   Asset Classes and Portfolio Construction

   4 topics

   • Understanding Asset Classes
     • Equity, debt, real estate, gold
     • Alternative investments
     • Liquidity and risk-return profiles
   • Asset Allocation Strategies
     • Strategic versus tactical allocation
     • Rebalancing approaches
     • Life-cycle investing
   • Portfolio Theory and Risk
     • Diversification and correlation
     • Modern Portfolio Theory and efficient frontier
     • Systematic and unsystematic risk
   • Performance Evaluation
     • Sharpe, Treynor, and Jensen's alpha
     • Attribution analysis
4. 4

   Taxation and Estate Planning

   3 topics

   • Income Tax Essentials for Investors
     • Heads of income and slab rates
     • Capital gains across asset classes
     • Tax-saving instruments under Section 80C
   • Estate and Succession Planning
     • Wills and nomination
     • Trusts and gifting
     • Succession laws overview
   • Behavioural Finance for Advisers
     • Common investor biases
     • Managing client expectations

Investment Advisory and Wealth Management flashcards for NISM Certifications

24 of 51 cards from the Investment Advisory and Wealth Management deck — real questions with worked answers.

1. Under SEBI (Investment Advisers) Regulations, 2013, who must register as an Investment Adviser?

   Any person who, for consideration, engages in providing investment advice to clients (advice on securities/investment products, including financial planning) must register with SEBI, unless specifically exempt.

2. What is the core distinction between 'investment advice' and 'distribution' under the SEBI IA Regulations?

   Investment advice is fee-based recommendation tailored to the client given by a registered IA; distribution involves selling products and earning commission. The same person cannot provide advice and distribution to the same client without segregation.

3. What is the minimum net worth requirement for an Investment Adviser that is a non-individual (corporate)?

   Rs. 50 lakh (net worth).

4. What is the minimum net worth/tangible net worth requirement for an individual Investment Adviser?

   Rs. 5 lakh (net worth).

5. Under the SEBI IA Regulations, what are the two permitted modes of charging fees by an Investment Adviser?

   (1) Assets under Advice (AUA) mode - capped at 2.5% of AUA per annum per client; (2) Fixed fee mode - capped at Rs. 1,25,000 per annum per client (family).

6. What is the segregation requirement an IA must follow between advisory and distribution activities?

   An IA must keep advisory and distribution activities segregated at the client level - the same client cannot be both advised and have products distributed to them by the same entity; a client must be either an advisory client or a distribution client.

7. What educational qualification is required for an individual Investment Adviser under the amended regulations?

   A professional/postgraduate qualification or graduate with 5 years experience in relevant field, plus a NISM certification (NISM-Series-X-A and X-B); ongoing certification must be maintained.

8. What is a fiduciary in the context of investment advisory?

   A fiduciary is one legally and ethically bound to act in the best interest of the client, placing the client's interests above their own and avoiding conflicts of interest.

9. What is the 'suitability' obligation of an Investment Adviser?

   The IA must ensure that all investment advice is appropriate to the client's risk profile, financial situation, investment objectives, and that the client is able to bear the associated risks - advice must match the client's needs.

10. Before giving advice, what client process must an IA mandatorily carry out under the suitability requirement?

    Risk profiling - assessing the client's risk tolerance, risk capacity, and risk appetite - and obtaining the client's consent on the risk profile.

11. What is the difference between 'risk capacity' and 'risk tolerance'?

    Risk capacity is the client's financial ability to absorb losses (objective, based on income, assets, time horizon); risk tolerance is the client's psychological willingness to take risk (subjective).

12. What document defines the terms of engagement between an Investment Adviser and a client?

    The advisory agreement (terms of engagement), which must disclose the advisory fees, scope, conflicts of interest, and the rights/obligations of both parties.

13. How long must an Investment Adviser maintain client records under the SEBI IA Regulations?

    Records must be maintained for a minimum of 5 years; if there is litigation, records must be kept until the dispute is resolved.

14. What is the periodicity of risk profiling review that an IA must conduct for clients?

    Risk profiling and suitability must be reviewed at least once a year (annually).

15. List the standard steps of the financial planning process.

    (1) Establish client-planner relationship; (2) Gather client data and goals; (3) Analyse and evaluate financial status; (4) Develop and present recommendations/plan; (5) Implement the plan; (6) Monitor and review periodically.

16. What is a personal financial statement comprising the 'net worth statement'?

    A statement of assets minus liabilities at a point in time; Net Worth = Total Assets - Total Liabilities.

17. What is the cash flow statement used for in financial planning?

    It records income (inflows) and expenses (outflows) over a period to determine surplus available for saving and investing; Surplus = Income - Expenses.

18. Define the Time Value of Money concept.

    A rupee today is worth more than a rupee in the future because money available now can be invested to earn returns; future and present values are linked by an interest/discount rate.

19. State the Future Value formula for a single lump sum.

    FV = PV x (1 + r)^n, where r is the periodic interest rate and n is the number of periods.

20. State the Present Value formula for a single future sum.

    PV = FV / (1 + r)^n, where r is the discount rate and n is the number of periods.

21. What is the formula for the Future Value of an ordinary annuity?

    FV = P x [((1 + r)^n - 1) / r], where P is the periodic payment, r the periodic rate, and n the number of periods.

22. What is the difference between an ordinary annuity and an annuity due?

    In an ordinary annuity, payments occur at the end of each period; in an annuity due, payments occur at the beginning of each period (so annuity due has one extra period of compounding/discounting).

23. What is the formula relating nominal rate to effective annual rate (EAR)?

    EAR = (1 + i/m)^m - 1, where i is the nominal annual rate and m is the number of compounding periods per year.

24. What is the 'Rule of 72'?

    An approximation for the number of years to double an investment: Years to double = 72 / annual rate of return (in %).

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