CISI Updated ICWIM Exam Questions and Answers by ava-grace

Investor classifications are based on financial assets, typically excluding property.

Why is Option B Correct?

High-net-worth individuals (HNWIs) are those with £500,000 to £1 million in investable assets.

Mass affluent investors usually have £100,000 to £500,000.

Why Not Other Options?

A (Mass affluent) → Below £500,000.

C (Very-high-net-worth) → Typically £1 million to £5 million.

D (Ultra-high-net-worth) → £30 million+ in assets.

???? Reference: FCA High-Net-Worth Client Classification, CISI Wealth & Investment Management.

Bearer shares are physical certificates that grant ownership, and the rights to those shares are with the bearer. If the certificate is lost or stolen, the investment could effectively be unrecoverable since ownership cannot be traced back to the investor.

Not being publicly named (A): This is an advantage of bearer shares, not a disadvantage.

Difficulty in valuation (C): Bearer shares’ value is similar to registered shares based on market conditions.

Impossible to sell part (D): Fractional transactions can still occur with bearer shares.

Challenger banks are newer, digital-first institutions that operate with modern technology, avoiding the legacy issues that traditional banks face.

Why is Option B Correct?

They lack outdated IT systems that traditional banks struggle to upgrade.

They focus on digital banking services, reducing operational inefficiencies.

Examples: Monzo, Starling Bank, Revolut.

Why Not Other Options?

A (Central bank) → Not a commercial bank; deals with monetary policy, not retail banking infrastructure.

C (Online bank) → Some online banks are part of traditional banks, inheriting legacy issues.

D (Retail bank) → Large banks have aging IT systems, regulatory burdens, and high costs.

???? Reference: UK Financial Conduct Authority (FCA) - Challenger Banks Report, CISI Wealth & Investment Management.

In a perfectly competitive market, short-term supernormal profits attract new firms into the industry, driving down profits to normal levels in the long run.

Why is Option B Correct?

Free market entry allows competitors to reduce market share and drive down prices.

Eventually, firms earn only normal profits, meaning no economic profit remains.

Why Not Other Options?

A (Continue making supernormal profit) → Not possible in perfect competition, as new firms enter.

C (Government regulation) → Market forces, not regulation, determine profit in perfect competition.

D (Firm cuts prices) → Price reduction occurs due to new competition, not voluntary price cuts.

???? Reference: Microeconomic Theory (Perfect Competition), CISI Wealth & Investment Management.