Certified Private Wealth Professional (CPWP) Module 1 Examination
Guidelines for Examination Preparation
Welcome to the "Guidelines for Examination Preparation". This section aims to assist candidates in preparing for the CPWP Module 1 Examination offered by the HKSI Institute. It explains the features of examination questions and provides some examination strategies and techniques that will be useful to candidates in their examination preparation. It is important for candidates to be aware that the CPWP Module 1 Examination is not an IQ test. A guess work approach, however intelligently applied, cannot be relied on by candidates. They require a rigorous approach to study.
Candidates often think that multiple choice questions (MCQs) examinations are simply a matter of being able to recognise true statements. They often assume that MCQ examinations are easier than essay-type examinations, as the correct answer is already provided as one of the available choices and they may score marks with a lucky guess. However, MCQs in fact require careful selection from a mix of correct and incorrect statements. Candidates answering MCQs are expected to know the subject matter being tested as a result of their diligent preparation.
CPWP Module 1 Examination includes two types of MCQs - simple MCQ and complex MCQ which consist of two parts:
- a stem (i.e. the text of the question), which asks a question, poses a problem, or presents an incomplete sentence;
- a choice of 4 possible sets of answers.
A 3-year bond with an annual coupon 3% yielding 5% per annum and a pay back at par value. The first coupon will be paid in exactly one year. Calculate the Macaulay duration of the bond.
In simple terms, the MCQs of the CPWP Module 1 Examination aim to test a range of abilities, including:
- Recall of the information;
- Understanding the information;
- Solving problems using required skills or knowledge;
- Comparing and discriminating between ideas.
It is therefore important to remember, understand and be able to apply the knowledge to practical situations.
Each examination paper of Paper 2 examination consists of 20 MCQs and a structured question. A structured question contains a scenario case and several open-end questions that requires candidates to apply and integrate knowledge and skills from different areas of the PWM.
Mr and Mrs Wong are married with two children aged 24 and 21. Mr Wong married late in life and is now retired due to ill health, while Mrs Wong, who is in her mid-50s, still manages the family business that was originally set up by her husband.
Mr and Mrs Wong always dreamed of passing the family business on to their two children and do wish for them to inherit equally. The older child is already an active member of the management team, the younger child however has no such interest and always suggests selling the business.
Mr and Mrs Wong prudently value their business at HKD120 million and have an investment portfolio worth HKD60 million that has been managed for them by a broker for many years. Their disposable income is approximately HKD7 million per annum, being a combination of business profits (HKD6 million) and investment income (HKD1 million). The investment portfolio is financed from any income that is not spent in a year, the broker investing these funds each year in a diversified range of investment funds.
Having devoted their lives to building the business, Mr and Mrs Wong have never undertaken any personal financial planning and have no retirement or succession plans in place. However, given Mr Wong’s forced retirement through ill health, they have decided to consider their future plans and have approached you for private wealth management advice and services.
You are currently conducting an initial meeting to gain an understanding of their needs. The meeting has revealed that Mrs Wong would like to retire and pass on the reigns of the business. To maintain their standard of living in retirement, Mr and Mrs Wong believe they require an annual retirement income of HKD2 million, which needs to grow with inflation. Neither of them has any real financial expertise, nor do they wish to be actively engaged in the investment process. However, the income needs to be achieved within the constraint of a low to medium risk tolerance and a preference for liquidity in their investment assets.
Moreover, you have determined that they wish to be remembered within the local community through some philanthropic means, although they haven’t yet formulated any details on this.
Answer ALL questions based on the above information:
- Identify the key wealth planning issues that you believe Mr Wong should be considering at present based on the customer profile provided. (15 marks)
- Outline the arrangements Mr Wong should ensure that his family continues to be able to access funds and operate the family business in the event of his disability or death. (25 marks)
- Advise and explain the appropriate mean for Mr Wong’s philanthropic purposes. (10 marks)
* Note: The example of structured question is intended to assist candidates to familiar with the format of structured questions. It is NOT actual question from the Paper 2 of CPWP Module 1 Examination. Under no circumstances shall the HKSI Institute be liable for any direct or indirect loss or damages caused or alleged to be caused by your use of or reliance on any materials in and/or content of this example.
MCQ examinations tend to focus on details, and detailed information cannot generally be retained effectively through short-term memory. However, it is not expected to test on those market and historical statistics/figures.
Plan your revision
Read every single topic in the study manuals and allow extra time for difficult topics. Each topic carries equal weight in the examination. DO NOT glance over topics you think you know already. DO NOT simply rely on the knowledge you have gained through whatever means alone as this may not always be technically correct. Make sure you know and understand the products, instruments, techniques, rules and regulations, etc. covered in the syllabuses.
Pay attention to fundamental terms, concepts and key definitions
Pay attention to fundamental terms, concepts and key definitions. For example, terms such as "structured product", "family office" and “correlation”, etc. Candidates are expected to know what they mean.
You are advised to use the Learning Outcomes for each topic of the study manuals as a guide to the way in which you study the materials. They indicate the expected key areas of knowledge which you should master. The revision questions and checklists included in each topic help to reinforce your understanding of the subject covered in the topic. You may also access the Sample Practice Test developed by the HKSI Institute in either online or paper-based format for your examination preparation.
Understand and digest the materials
DO NOT just read and memorise the study manuals. Think about the issues and the practical application of them, where relevant. If possible, discuss the issues with other experienced practitioners.
It should be noted that there are variety of private wealth management products and practices with similar titles and yet different terms and conditions, available in the market. The study manuals may include some products and practices without the intention to cover an exhaustive list. However, examination questions would be set basing on the materials in the study manuals.
You have limited time to answer a certain number of questions. On average, you have around two minutes per question.
Read the questions including all the choices carefully
Read the questions carefully, more than once, if necessary.
Is the question asking for:
- the only correct answer? - e.g. Which ONE of the following statements is CORRECT?
- two or more correct answers? - e.g. Which of the following statements are CORRECT?
- the best answer? - e.g. Which ONE of the following is MOST LIKELY ......?
- the incorrect alternatives? - e.g. Which of the following statements are INCORRECT?
Read all the choices before answering a question. DO NOT assume that because the first or second choice appears correct, it is not necessary to read the remaining options.
Revisit the question
If you are unsure of the answer to a question, leave it and return to it later. DO NOT waste time over questions which you find difficult at the start. First, complete the answers for questions you know well. Then, try those questions you could not do on the first attempt. Sometimes, the answer will occur to you simply because you are more relaxed after having answered other questions.
DO NOT make any assumptions
All MCQs have been set out randomly so DO NOT assume that one question follows on from the previous one. DO NOT make assumptions when answering. Answer the questions as they are stated.
Identify the distractors that look as if they are correct but are not
Questions are not designed to mislead candidates. Good distracters (i.e. incorrect choices in the list of options) often appear to be correct but in fact, they are wrong. Distractors are designed to discriminate between those who really know the correct answer, and those who do not.
Make educated guesses
Make sure you have answered all the questions and double-check your answers. Marks WILL NOT be deducted for questions answered incorrectly in the CPWP Module 1 Examination. However, avoid pure guessing, rather eliminate answers that are obviously wrong and then choose carefully from those that remain.
Effective time management is critical to success in any examination. Candidates are suggested to spend 60 minutes on the structured question for reading and analysing the case extensively, as well as answering a series of questions regarding the case. Candidate may allocate sufficient time for each question based on the marks allocated.
Read the question through carefully
Candidates are advised to read the questions carefully to make sure what is expected in the answers. Missing any part of a question may cost lot of marks.
Use relevant case information fully to answer the questions
Candidates are strongly advised to carry out extensive analysis on the case. When answering the questions, candidates not only need to identify the relevant issues, state clearly their views, and apply relevant knowledge learned from the study manual to solve the problem, but also need to provide relevant case information to support the argument and conclusions.
Well structured answer
Well-organised, clear and concise answer may earn higher marks. Thus, candidates are strongly advised to make a quick plan of point for what to include in your answer.
Two of the most effective methods to combat carelessness are to re-read the questions before answering them and to check your answers before submitting them.
Failure to focus on questions
Some MCQs call for facts more than thought, but some require you to use factual information in a thinking process. Examination logic requires that you think thoroughly, concentrate upon the questions and answers, and search for memory cues to information that you have studied.
Cramming means mastering a lot of new materials in a relatively short period of time. Cramming does NOT work well for passing an examination because materials learned within 24 hours are difficult for most of us to recall. A final review is a last effort to organise and brush up on previously studied materials, but is not suitable for remembering new information. Educational psychologists suggest that the most effective technique for long-term memory is to use a series of study periods over a predetermined schedule broken by regular rest intervals.