Test Objectives (Investment Adviser Level-2)
MODULE 7: RISK MANAGEMENT AND INSURANCE PLANNING
Chapter 1: Basics of Insurance
1.1 Discuss some simplistic/common examples
1.2 Discuss the need for insurance
1.2.1 Requirements of an insurable risk
1.3 Discuss the Fundamental Principles of Insurance
1.3.1 Utmost good faith (Uberrimae Fidei)
1.3.2 Understand the concept of Insurable interest
1.4 Concepts in Insurance
• Indemnity insurance
• Benefit insurance
• Subrogation
• Contribution
• Co-pay
• Deduction
• Others concepts
1.5 Understand Role of Insurance in Personal Finance
1.6 Understand Investing through Insurance
1.6.1 Should investment be done via insurance
1.6.2 Prioritizing insurance needs and investment needs
1.7 Discuss the Role of Insurance Advisor
1.7.1 Steps in Insurance planning
• Identify the insurance need
• Estimate the insurance coverage
• Identifying the most suitable insurance product
• Optimise the insurance premium
• Monitor the insurance coverage
1.8 Regulations
1.8.1 Health Insurance
1.8.2 Unit Linked Insurance products (ULIPS)
1.8.3 Regulatory aspects for insurance intermediaries
1.8.4 Regulations for insurance intermediaries under IRDAI regulations
1.8.5 Do’s and don’ts under SEBI (IA) Regulations
Chapter 2: Features of life insurance products
2.1 Elements of life insurance products
2.2 Discuss life insurance need analysis
2.2.1 Estimate the life insurance coverage
2.3 Know the Life Insurance Products
• Term insurance
• Term insurance with return of premiums
• Endowment
• Whole Life Insurance
• Unit-Linked Insurance
• Mortgage Insurance
2.4 Know various facilities available under life insurance policies
• Loan against insurance policy
• Nomination and change of nomination
• Policy assignment
2.5 Discuss Insurance under Married Women’s Property Act (MWPA)
2.6 Understand the benefits/limitations and provisions when insurance is taken from multiple companies (this should cover all the different types of insurance policies, including group policies and employer provide policies, Merits/demerits of surrendering insurance before maturity period)
2.7 Understand the criteria to evaluate various life insurance products
2.7.1 (Traditional life insurance policy or unit-linked plans; offline plans versus online plans)
2.7.2 Investment linked insurance plans or pure term insurance
2.8 Understanding global coverages for different Life insurance products
Chapter 3: Features of non-life insurance products
3.1 Understand the Non-life insurance
3.1.1 Elements of non-life insurance products
3.1.2 Types of non-life insurance products
3.2 Understand the benefits/limitations and provisions when insurance is taken from multiple companies (this should cover all the different types of insurance policies, including group policies, understand the benefits and limitations of employer-provided insurance
3.3 Understand the criteria to compare various insurance products
• Health insurance policy vs. Critical illness policy
• Offline versus Online Insurance Policies (cover all general insurance products)
3.4 Understanding global coverages for different General Life insurance products
MODULE 8: RETIREMENT PLANNING
Chapter 4: Retirement planning basics
4.1 Understand the need for retirement planning and prioritising it
4.2 Know the difference between various financial goals and retirement
4.3 Understand Retirement Planning
4.3.1 Impact of inflation
4.3.2 The expected rate of return
4.4 Understand how to estimate the retirement corpus (sums)
4.4.1 Replacement Ratio Method
4.4.2 Expense Protection Method
4.5 Discuss employee benefits and superannuation benefits
Chapter 5: Retirement products
5.1 Discuss accumulation related products
5.1.1 Employees Provident Fund
5.1.2 Voluntary Provident Fund
5.1.3 Public Provident Fund
5.1.4 Gratuity
5.1.5 Superannuation Benefit
5.1.6 National Pension System
5.1.7 Atal Pension Yojna
5.1.8 Retirement Plans from Mutual Funds and Insurance Companies
5.2 Portfolio created by an investment adviser for the purpose
5.3 Discuss distribution related products
5.3.1 Discuss in detail annuity products from insurance companies
5.3.2 Discuss Systematic Withdrawal Plans (SWP) from mutual funds
5.3.3 Discuss Laddering of bonds or fixed deposits
5.3.4 Discuss Senior Citizen’s Savings Scheme
5.3.5 PM Vaya Vandana Yojana,
5.3.6 Post office MIS
5.3.7 Discuss Reverse Mortgage
Chapter 6: Miscellaneous aspects of retirement planning
6.1 Understand Advisor’s role in retirement planning
6.2 Discuss with examples in detail various calculations for retirement planning
6.3 Understand the criteria to evaluate various retirement benefit products
6.4 Discuss about Philanthropy
MODULE 9: TAXATION
Chapter 7: Concepts in Taxation
7.1 Know the Framework and Sources of Tax Regulations in Securities Markets (Sources: GST Council, CBDT Circulars, IT Act, IT Rules
7.2 Understand the Key concepts
7.2.1 Assessment Year vs Previous Year
7.2.2 Learn about Person
7.2.3 Learn about Assessee
7.3 Know the Income
7.4 Learn about Residential Status
7.4.1 Residential status of an individual
7.4.2 Residential status of HUF
7.4.3 Residential status of company
7.4.4 Residential status of Firm or AOP or BOI or Local Authority or Artificial Juridical Person
7.4.5 Know the Scope of Income
7.5 Understand the different heads of Income (giving examples of securities markets under the different heads)
7.5.1 Salary Income
7.5.2 House Property Income
7.5.3 Profits and Gains of Business or Profession
7.5.4 Capital Gains (LTCG & STCG)
7.5.5 Income from Other Sources
7.6 Learn about the Clubbing of income
7.6.1 Income from assets transferred to another person
7.6.2 Income of another person to be included in taxpayer’s income [Section 64]
7.7 Know the Set off and Carry Forward of Losses
7.7.1 Loss under the head capital gains
7.7.2 Loss under the head profits and gains of business or profession
7.7.3 Loss under the head ‘Income from house property’
7.7.4 Loss under the head other sources
7.8 Understand the Exempt income
7.9 Deductions under Chapter VI-A
7.10 Rebate under Section 87A
7.11 Learn about the Minimum Alternate Tax (MAT)
7.12 Learn about the Alternate Minimum Tax (AMT)
7.13 Learn about the Gross Total Income
7.14 Learn about the Total Income
7.15 Computation of Tax Payable
7.15.1 Non-corporate assessee
7.15.2 Corporate assessee
7.16 Learn about the Double Tax Avoidance Agreement (DTAA)
7.16.1 Types of DTAA
7.17 Understand Taxation Regime
7.18 Know the Maximum Marginal Rate of Tax (MMR)
7.19 Know the Effective Rate of Tax
7.20 Tax Alpha
7.21 Learn about the General Anti-Avoidance Rules (GAAR)
Chapter 8: Capital Gains
8.1 Basic concepts of Capital gains
8.2 Understand what are Capital Assets
8.3 Know the Types of capital asset
8.3.1 Calculating Period of Holding
8.4 Learn about the Transfer
8.4.1 Transactions not regarded as transfer
8.5 Understand the Computation of capital Gains from transfers
8.5.1 Conversion of Capital gain earned in foreign currency into Indian Rupees
8.5.2 Tax rates on capital gains
8.5.3 Exemption for capital gains
Chapter 9: Income from Other sources
9.1 Know the Income from other sources
9.2 Understand the dividend income
9.3 Understand the Interest on Securities
9.4 Discuss the Gift of Securities
9.4.1 Computation of Income
9.4.2 Computation of fair market value
9.4.3 Cases when income is not chargeable to tax
9.5 Learn about the Shares issued at Premium by closely-held company
9.5.1 Taxability of excess premium
9.6 Understand the applicability of income computation and disclosure standards (ICDS)
Chapter 10: Taxation of Debt Products
10.1 Explain the Sources of Income
10.1.1 Interest Income
o Accrual Basis
o Receipt Basis
10.1.2 Capital Gains
10.2 Describe the Types of debt products (Tax treatment of the following bonds when they are listed and when they are unlisted; also cover stamp duty)
10.2.1 Coupon Bond
10.2.2 Zero Coupon Bonds & Deep Discount Bonds
10.2.3 Convertible Bonds
10.2.4 Commercial Papers
10.2.5 Government Securities
10.2.6 Tax Free Bonds
10.3 Learn about the Mutual Funds
10.3.1 Types of Mutual Funds
10.3.2 Tax on Income from Mutual Funds
10.3.3 Tax on dividend from Debt oriented mutual funds
10.3.4 Tax on long-term capital gains from debt oriented mutual funds
10.3.5 Tax on short-term capital gains from debt oriented mutual funds
10.4 Know the Masala Bonds
10.5 Discuss the Foreign Currency Convertible Bonds
10.6 Understand the Financial Securities
10.6.1 Pass through certificates or Securitised debt instruments
10.6.2 Security receipts
10.7 Taxation of Non-residents
Chapter11: Taxation of Equity Products
11.1 Explain the Sources of Income
11.1.1 Dividend Income
11.1.2 Capital Gains
11.2 Describe the tax treatment for Listed Equity
11.2.1 Charges and Taxes
11.2.2 Tax on dividend
11.2.3 Tax on inter-corporate dividend
11.2.4 Tax on long-term capital gains as per section 112A
11.2.5 Tax on long-term capital gains as per section 112
11.2.6 Tax on short-term capital gains as per section 111A
11.2.7 Tax on normal short-term capital gain
11.3 Describe the tax treatment for Unlisted Shares
11.3.1 Tax on dividend from unlisted shares
11.3.2 Tax on long-term capital gains from unlisted shares
11.3.3 Tax on short-term capital gains from unlisted shares
11.4 Understand the taxation of Preference Shares
11.4.1 Tax on dividend from Preference shares
11.4.2 Tax on long-term capital gains from Preference shares
11.4.3 Tax on short-term capital gains from Preference shares
11.5 Understand the Taxation of GDR/ADR
11.5.1 Tax implications of GDR/ADR in case of non-resident
11.5.2 Tax implications of GDR/ADR in case of Resident
11.6 Understand the Taxation of Warrants
11.6.1 Tax on conversion of share warrants into shares
11.6.2 Tax on transfer of share warrants
11.7 Learn about the taxation of Mutual Funds (including Fund of Funds and ELSS; SIPs, SWPs, STP)
11.7.1 Taxation of Mutual Funds
11.8 Learn about the tax treatment of Derivatives
11.8.1 Types of Derivatives contracts
11.8.2 Nature of Derivatives income
11.8.3 Computation of Turnover
11.8.4 Scheme of Taxation
11.8.5 Set off and carry forward of losses
11.9 Understand about Dividend
11.10 Understand Bonus Stripping
11.11 Discuss the benefits allowed from capital gains
11.11.1 Benefits not allowed from long-term capital gain chargeable to tax at the rate of 20%
11.11.2 Benefits not allowed from long-term capital gain chargeable to tax at the rate of 10
11.11.3 Benefits not allowed from short-term capital gain chargeable to tax at the rate of 15% under section 111A and 115AD
11.12 Adjustment of Exemption limit from capital gains
11.13 Overview of Taxation of Equity products
Chapter 12: Taxation of Other Products
12.1 Know the tax aspects of Employee Stock Ownership (ESOPs)
12.1.1 Terms of ESOP
12.1.2 Tax implication of ESOPs
12.1.3 Deferment of tax on perquisite value of ESOPs in case of start-ups
12.2 Know the Sovereign gold bonds
12.2.1 Tax implications on SGBs
12.3 Know the National Pension System (NPS Tier 1 & Tier 2)
12.3.1 Tax treatment of contribution to NPS
12.3.2 Tax treatment of sum received from NPS
12.4 Know about the tax aspects of Real Estate Investment Trusts (REITs)
12.4.1 REIT Tax Implication
12.4.2 Tax implication on the transfer of units of REITs by unit-holder
12.4.3 Taxability in the hands of sponsors
12.4.4 Applicability of TDS
12.4.5 Reporting of income by REITs to its unit-holders
12.5 Know about the tax aspects of Infrastructure Investment Trust (InvITs)
12.6 Know about the tax aspects of Alternate Investment Funds (AIF)
12.6.1 Taxation of AIF Category I & II
12.6.2 Taxation of AIF Category III
12.7 Learn about the Exchange Traded Funds (ETFs)
12.7.1 Gold ETFs
12.7.2 Index ETFs
12.8 Know the tax aspects of Life Insurance Products
12.9 Know the tax aspects of reverse mortgage
12.10 Learn about the tax aspects of Other Derivative Products
Chapter 13: Tax provisions for special cases
13.1 Understand the tax applicability on Bonus issues
13.1.1 Taxation under the head of capital gains
13.1.2 Taxable under the head profits and gains from business or profession (PGBP)
13.2 Understand the tax applicability on Split & Consolidation of securities
13.2.1 Taxation under the head of capital gains
13.2.2 Taxable under the head PGBP
13.3 Understand the tax applicability on Buyback of Shares
13.3.1 Domestic Company liable to pay tax
13.3.2 Consequences of Default
13.4 Understand the tax applicability on Liquidation of Companies
13.4.1 Tax liability in the hands of the company
13.4.2 Tax liability in the hands of the shareholders
13.5 Understand the tax applicability on Rights issues
13.5.1 Taxability at the time of renunciation of right
13.5.2 Taxability at the time of issuance of shares
13.5.3 Taxability at the time of sale of shares
13.6 Understand the tax applicability on Mergers & Acquisitions of securities
13.6.1 Taxability at the time of allocation of shares
13.6.2 Taxability at the time of transfer of shares
13.7 Understand the tax applicability on Stock Lending and Borrowing
13.7.1 Taxability in hands of lenders
13.7.2 Taxability in hands of borrowers
13.8 Understand the tax applicability on conversion of Bonds or Preference shares in equity shares.
13.9 Taxation in case of Conversion of Stock into Capital Asset
13.10 Understand the tax applicability in case of segregated portfolios in mutual funds
13.11 Understand the tax liability in case of consolidation of mutual fund schemes or plans
13.12 Taxation in case of winding up of Mutual Funds
MODULE 10: ESTATE PLANNING
Chapter 14: Basics of Estate Planning
14.1 Explain Estate Planning
14.2 Discuss what constitutes estate
14.2.1 Discuss the consequences of dying intestate
14.3 Know the elements of Estate Planning
14.4 Know about the applicable laws
14.4.1 India Succession Act, 1925
14.4.2 Married Women’s Property Act, 1874
14.5 Mutation
Chapter 15: Tools for Estate Planning
15.1 Know about various tools for estate planning – before death and after death
15.2 Understand the concept of Wills
15.2.1 Characteristics and content of will
15.2.2 Types of will—unprivileged, privileged, joint, mutual and conditional, living will, oral will
15.2.3 Legal requirement and testamentary capacity
15.2.4 Registration of Wills
15.2.5 Modifying and revoking a will
15.2.6 Codicils
15.2.7 Succession certificate
15.2.8 Role of the executor
15.3 Know about the probate process
15.4 Discuss the concept of Gifts, Joint Holding and Nomination
15.4.1 Gifts
15.4.2 Joint Holding
15.4.3 Nominations
15.5 Understand Family Settlement
15.5. 1 Intra family business and property transfer
15.5.2 Forms of family business ownership
15.5.3 Transfer of business and inter-generation wealth transfer
15.6 Trust-Characteristics and Regulations
15.6.1 Indian Trust Act
15.6.2 Classification of Trust-revocable/irrevocable and simple/complex
15.6.3 Characteristics of trust-discretionary and determinate
15.6.4 Different types of a family trust
15.6.5 Family trust versus will
15.6.6 Parties to trust
15.6.7 Hybrid trust
15.6.8 Cancellation (extinguishing) and revocation of trust, other provisions
15.6.9 Trust structure for tax efficiency
15.6.10 Trust structure to align strategic objectives of the settler
15.6.11 Trust perpetuities
15.6.12 Trust as a pass-through entity
15.6.13 Lower taxes on future earnings and capital gains
15.6.14 Direct acquisition of asset-benefit of stamp duty and capital gains tax
15.6.15 Offshore trusts and regulatory requirements
15.6.16 Distributable net income
15.7 Discuss Powers of Attorney
15.7.1 Use and purpose
15.7.2 Types—general and special
15.7.3 Revocation
15.7.4 Limits of PoA holder
15.7.5 PoA executed abroad
MODULE 11: BEHAVIOURAL FINANCE
Chapter 16: Basics of Behavioural Finance
16.1 Behavioural Finance Versus Standard Finance
16.2 How do individuals make decision?
16.2.1 Bounded Rationality
16.2.2 Prospect Theory
16.3 Categorization of Biases
16.3.1 Emotional Biases
16.3.2 Cognitive errors
16.4 Fusion Investing
16.5 How behavioural Finance explains Market Anomalies
16.6 How behavioural Finance explains Bubbles and crashes
Chapter 17: Behavioural Finance in Practice
17.1 Discuss the role of emotions in goal setting
• Retail therapy – stress buster or escape mechanism?
• Too many and too frequent transactions
• Chasing past performance
• Home country bias
• Buying insurance for tax saving
• Too much diversification or highly concentrated portfolio
• The impact of framing on risk tolerance questions
• Overconfidence and dilution in risk management
17.2 Discuss nudging the investor to behave better
17.3 Understand the role of investment adviser in management of client emotions
MODULE 12: COMPREHENSIVE INVESTMENT ADVICE
Chapter 18: Risk Profiling for Investors
18.1 Understand risk profiling for investors
18.2 Discuss various parameters for risk profiling
18.3 Understand the role of risk profiling in asset allocation
18.3.1 Investor’s risk profile with asset allocation
18.3.2 Model portfolios and their application
Chapter 19: Comparison of products across categories
19.1 Discuss performance data for investment products
19.2 Attribute portfolio performance and evaluate the investment alternatives
19.2.1 ELSS vs. Other Tax Saving Instruments
19.2.2 Mutual Funds vs. Portfolio Management Services (PMS) vs AIF
19.2.3 Mutual funds vs. ULIP
19.2.4 Actively managed equity mutual funds vs. Index funds
19.2.5 Direct Equity vs. Equity Funds
19.2.6 ETFs versus Index Funds
19.2.7 Physical Gold vs. Gold Funds vs. Sovereign Gold bonds vs Gold ETFs
19.2.8 Real estate vs REITS vs INVIT
19.2.9 Debt Instruments vs. Debt Funds vs .Bank Fixed Deposit vs. Fixed Maturity Plans
19.2.10 Index futures vs Index Options vs Index Funds (time horizon, cost and risks)
19.2.11 Gold Futures vs Gold ETFs time horizon, cost and risks)
19.2.12 Company deposits vs debentures
19.3 Evaluate various alternatives among other products
19.3.1 Market linked vs Non-market linked retirement accumulation products
19.3.2 Critical illness policy vs. Critical illness rider
19.3.3 Personal Accident insurance v/s Life insurance
Chapter 20: Case Studies
20.1 Understand practical aspects of providing financial advice through case studies (Creating Financial Plans (how to select from different asset classes. Risk-return, choices, so many tools are there but how will solution….application, Unified and Segregated portfolio)
20.2 Create and interpret comprehensive financial planning solutions for the household
[The candidates are to be tested on the interplay between various aspects of financial planning.]
