CISI Chartered Wealth Manager key terms

The obligation to recommend or execute only those transactions and products that match a client's documented objectives, risk tolerance, financial position and knowledge, rather than what is easiest to sell.

The process of collecting and periodically updating information about a client's circumstances, goals, experience and identity so that advice and identity checks rest on accurate facts.

A legal and ethical standard requiring a professional to act in the client's best interests ahead of their own, disclosing conflicts and avoiding undisclosed personal gain from the relationship.

Situations where a firm's or adviser's own interests, or those of another client, could improperly influence the advice or service given, requiring identification, disclosure and management.

A fee, commission or non-monetary benefit paid by a third party to influence how a firm distributes products; client-facing inducements are generally restricted and must be disclosed or banned.

A conduct principle requiring firms to deliver fair outcomes across the product lifecycle, from design and marketing through advice, execution and post-sale handling of complaints and claims.

A client whose personal circumstances, such as health, age, bereavement or low financial capability, reduce their ability to make informed decisions and therefore require enhanced care and record-keeping.

Funds held on behalf of clients that must be segregated from the firm's own assets in designated accounts, reconciled regularly and protected by specific rules if the firm fails.

A status under which advice is given free of product-provider influence, typically with no commissions and with fees agreed directly with the client, so recommendations cover the whole market.

A structured assessment of a client's willingness and ability to bear investment loss, combining attitude questions with capacity measures such as time horizon, income stability and liquidity needs.

The objective financial ability to absorb a fall in portfolio value without derailing essential goals, which may differ sharply from a client's stated willingness to accept risk.

The division of a portfolio among asset classes such as equities, bonds, property and cash, which is the dominant driver of long-term return variability and risk.

The long-term target mix of asset classes set from the client's goals, risk profile and capital market assumptions, against which actual positioning is monitored and rebalanced.

Short-term deliberate deviations from the strategic mix, made to exploit market views or manage risk, which must be bounded by mandate limits and monitored for drift.

Spreading exposure across assets, sectors and regions so that no single loss dominates portfolio outcomes; it reduces specific risk but leaves market risk intact.

A measure from -1 to +1 of how closely two assets' returns move together, used to judge whether combining them genuinely reduces portfolio volatility.

The statistical dispersion of returns, commonly the annualised standard deviation, used as a practical proxy for the short-term uncertainty of an investment's value.

Market-wide risk, such as recession or interest-rate shocks, that cannot be removed by holding more securities because it affects all assets to some degree.

A sensitivity measure showing how much an asset tends to move when the market moves; a beta above one implies amplified market exposure and below one implies dampened exposure.

Periodically returning a portfolio to its target weights by selling overweight holdings and buying underweight ones, restoring intended risk and enforcing a disciplined sell-high, buy-low process.

The period over which money is invested before it is needed, which shapes how much short-term volatility can be tolerated and how illiquid or growth-oriented assets are appropriate.

The danger that an asset cannot be sold quickly at a fair price, or that a client's cash needs force a sale during a downturn, crystallising losses.

A statistical estimate of the maximum loss a portfolio might suffer over a defined period at a given confidence level, useful for limits but silent about losses beyond that threshold.

Evaluating a portfolio or plan against severe but plausible scenarios, such as a sharp equity fall or rate spike, to check whether goals remain achievable.

A modelling technique that runs many randomised return paths to estimate the probability of meeting a financial goal, producing a success rate rather than a single projection.

Projecting a client's income, spending, taxes and assets over time to test whether goals such as retirement spending are fundable, and to compare planning options.

The risk that rising prices erode the real purchasing power of returns and income, which matters most for long horizons and for cash or fixed-income heavy portfolios.

Investment return after subtracting inflation, showing the actual increase in purchasing power; planning targets should be set in real terms to avoid overstating future wealth.

An arrangement where the client grants the manager authority to buy and sell within an agreed mandate without prior approval for each trade, relying on suitability and reporting safeguards.

The documented contract setting out a portfolio's objectives, permitted asset classes, risk limits, benchmarks and restrictions, and the basis on which the manager is judged.

A legal arrangement in which trustees hold and manage assets for beneficiaries under the terms of a deed, separating legal ownership from beneficial enjoyment for succession, protection or tax purposes.

The right to enjoy the benefit of assets, such as income or capital, even where legal title is held by someone else such as a trustee or nominee.

The obligations of a trustee to act honestly and in good faith, invest prudently, avoid conflicts, account to beneficiaries and follow the trust deed and applicable law.

A tax charged on the value of an estate on death, and on certain lifetime transfers, typically with reliefs and exemptions such as spouse transfers and business or agricultural property relief.

A lifetime gift that is free of inheritance tax if the donor survives seven years, otherwise it is brought into the death estate calculation and may use up the nil-rate band.

Structuring ownership, gifts, trusts, pensions and wills so that wealth passes to intended beneficiaries efficiently, with controlled tax exposure and adequate liquidity.

A legal document authorising a named person to make decisions, financial or otherwise, on another's behalf, often used when capacity declines and continuing registration is required.

A tax on the profit realised when disposing of an asset, calculated from proceeds less allowable cost and reliefs, with annual exemptions and rates that vary by asset type and taxpayer.

A structure such as an individual savings account or pension that changes how investment returns are taxed, for example by exempting income and gains or granting relief on contributions.

The legal jurisdiction a person regards as their permanent home, which can differ from residence and nationality and strongly affects exposure to inheritance tax and other taxes.