Wealth Management Theory and Practice (Yale)

Human Dynamics Section 1: Ethics List and differentiate among the seven elements of IWI’s Code of Professional Responsibility. Section 2: Applied Behavioral Finance Demonstrate knowledge of the history and evolution of behavioral finance. Section 3: Family Dynamics Demonstrate knowledge of resources and skills required to engage in client discovery in order to identify issues and opportunities relative to family dynamics including identifying and assessing collective and individual values, and goals and objectives of family members. Part II: Wealth Management Strategies Section 4: Tax Strategies and Planning Demonstrate knowledge to review and interpret personal tax forms and calculations to understand client situations and planning opportunities in current and future years based on client tax jurisdictions; Understand the Alternative Minimum Tax (AMT) calculation and how it differs from the regular federal income tax calculation; Understand and calculate charitable income tax deductions and limitations applicable to cash and appreciated asset contributions to public charities and private foundations; Demonstrate an understanding of pass-through entities including the flow- through feature of income, limitations that apply at the individual level, classification of income as passive or active, and the proper characterization of income and deductions to individual taxpayers. Section 5: Portfolio Management Demonstrate ability to calculate and understand risk adjusted returns and portfolio risk metrics including the impact of leverage; Knowledge of portfolio risk management strategies including diversification, hedging, etc.; Demonstrate knowledge of problems, issues, and risks of alternative investments (“AI”) and the benefits and risks of incorporating AI into a portfolio. Section 6: Risk Management and Asset Protection Demonstrate knowledge of insurance coverage types and identify common gaps in coverage for the unique activities and special assets of high net worth clients; Compare insurance policy pricing and structures, and analyze self-insuring as a strategy; List and describe creditor protection features of various asset structures and identify assets at risk. Part III: Client Specialization Section 7: Client Focus - Executives Demonstrate knowledge of the planning implications of executive stock options including the tax ramifications (e.g., holding periods, basis, tax liability, and effect on alternative minimum tax) of exercising incentive and non-qualified stock options; Demonstrate an understanding of the different types and tax implications of executive deferred compensation plans; Identify the financial and tax implications of a concentrated stock position in the context of the client’s net worth, risk tolerance, and long-term objectives. Section 8: Client Focus - Closely Held Business Owners Demonstrate an understanding of the various methods of financing used by closely held business owners including the use of angel investors, venture capital funding, mezzanine financing, leveraged buyouts, distressed debt, and restructuring; Identify potential family conflicts and issues resulting from succession planning or the sale of a closely held business as they relate to family dynamics; Differentiate between different types of business entity structures (e.g., c- corporations, s-corporations, limited liability companies, and partnerships) including applicable taxation resulting from operations and the sale of the business; Describe the types of buy-sell agreements (e.g., cross-purchase, entity redemption, etc.) and funding strategies applicable for death and disability planning. Section 9: Client Focus - Retirement Describe qualified plan rules and structures (e.g., 401(k) plans, profit sharing plans, defined benefit plans, cash balance pension plans, and hybrid plans); Calculate the time value of money in the context of accumulation and distribution planning for retirement; Determine the tax treatment of distributions from various types of retirement plans. Part IV: Legacy Planning Section 10: Charitable Giving Describe the rules, requirements, and taxation regarding gifts made to public and private charities and private foundations; identify rules that govern gifts to each; Identify the tax character of property being donated; Describe the rules for and taxation of donor-advised funds. Section 11: Estate Planning and Wealth Transfer Evaluate a client's current estate plan, and understand and interpret estate planning documents; Develop strategies to provide living support and protection of heirs while preserving a client’s estate and wealth-transfer goals; Evaluate the best course of action for lifetime gifts vs. transfers at death; Demonstrate knowledge of incapacity planning strategies; Describe the concept of powers of appointment; Describe the various aspects of postmortem planning; Explain estate planning issues for non-traditional relationships; Identify proper titling and beneficiary designation strategies; Demonstrate knowledge of probate estates and intestacy issues. Human Dynamics Section 1: Ethics Analyze the relationships among firm, advisor, client, and other applicable professionals given the responsibility of each CPWA certificant to place the client’s financial interests first; Understand requirements to disclose all compensation received for services provided and all potential conflicts of interest; List all requirements necessary to maintain the CPWA certification, and describe the rules and consequences pertaining to violations of IWI’s Code of Professional Responsibility Section 2: Applied Behavioral Finance Demonstrate knowledge of published neurological research in the field of behavioral finance, and describe conclusions from these studies related to financial and investment decision making; List and describe various behavioral biases based on existing beliefs and how they may impact financial decision making and behavior; List and describe various behavioral biases based on information processing and how they may impact financial decision making and behavior; List and describe various behavioral biases based on emotions and how they may impact financial decision making and behavior; List and describe primary investor personality types, and explain how they may impact client decision making Section 3: Family Dynamics Identify key family roles and positions, as well as special circumstances and unique situations; and develop plans that align individuals with appropriate family roles; Identify family dynamics and sources of conflicts; Develop a family education plan appropriate to meet stated needs and objectives; Identify the elements necessary to conduct a successful family meeting and help clients develop a family mission statement; Knowledge of when and how to incorporate the appropriate family office infrastructure tailored to the family’s wealth level and objectives ________________________________________________________________________ Part II: Wealth Management Strategies Section 4: Tax Strategies and Planning Identify transactions and situations that result in AMT and develop strategies to avoid or minimize AMT and/or maximize the use of AMT credits; List interest expense classifications and applicable limitations including the treatment of mortgage interest, investment interest expense, and interest on business activities, and recommend alternative strategies to maximize current interest deductibility; Understand taxation of investment transactions including capital gains, qualified and non-qualified dividends, and wash sale rules; Calculate the tax liability of executive stock option exercises; Demonstrate an understanding of tax basis rules and gains from disposition as they apply to pass-through entities owned by individuals; Identify strategies to defer gains on various property transactions, including like-kind exchanges and sales of certain small business stock; Demonstrate tax issues and planning strategies common to high-net-worth clients including intra- family tax planning opportunities and strategies for shifting income and taxation; Demonstrate knowledge of trust taxation Section 5: Portfolio Management Skill to evaluate, implement and monitor hedging strategies including options and non-options hedging, and non-hedging strategies; Demonstrate the skill to calculate and evaluate after-tax returns and tax efficiency for various asset classes and categories; Demonstrate knowledge and skill to implement tax gain and loss harvesting strategies; Evaluate bond and equity managers on an after-tax basis; Position asset classes and managers by the tax characteristics of investment entities including personal taxable assets, qualified retirement accounts, and individual retirement accounts (IRAs); Integrate an appropriate mix of alternative investments into a portfolio based on a client’s objectives, time horizon, risk tolerance, and applicable constraints; Demonstrate knowledge of the distinguishing characteristics of socially responsible investing (e.g., shareholder advocacy, inclusive or exclusive strategies, green investing); Demonstrate knowledge of liability-driven and goal-driven investing for individual portfolios Section 6: Risk Management and Asset Protection List asset and creditor protection strategies and entities including the advantages, disadvantages, and legality of each; Compare various entities used in asset and creditor-protection strategies; Describe common transfer techniques and differentiate between legal transfers and fraudulent conveyance; Describe and analyze domestic trusts as an asset protection tool, and define and differentiate between self-settled trusts, grantor trusts, dynastic trusts, and domestic asset protection trusts; Describe and analyze off-shore trusts as an asset-protection strategy ________________________________________________________________________ Part III: Client Specialization Section 7: Client Focus - Executives Develop option exercise strategies for both incentive and non-qualified option awards based on client objectives; Describe the consequences, and advantages and disadvantages of making a Section 83(b) election as it pertains to executive stock options; Demonstrate an understanding of the calculation, execution, and value of a cashless exercise, an exercise and hold strategy, and a pyramiding (stock swapping) strategy; Develop an appropriate strategy and prioritize the interaction of incentive and non-qualified stock options by incorporating risk and reward analysis based on client objectives; Differentiate between different equity compensation plans including restricted stock, phantom stock, and performance share plans; and describe the tax implications of each; Identify regulatory rules and restrictions governing a corporate executive’s publicly held stock including short-swing profits, insider information, exercise windows, and other policies unique to the issuing company; Calculate tax results of various outright stock sales over multiple time periods in order to develop tax efficient strategies and action plans; Demonstrate knowledge of the value, risks, and tax implications of diversifying concentrated stock portfolios, such as cashless collars, prepaid variable forward contracts, portfolio margin strategies, exchange funds, and charitable remainder trusts; Demonstrate knowledge of the value, risks, and tax implications of utilizing Section 10b-5(1) plans Section 8: Client Focus - Closely Held Business Owners Analyze closely held business exit strategies and succession plans; Determine which buy-sell agreements are most appropriate based on entity structure and a client’s needs including intended exit strategy; Differentiate among the different valuation methodologies and list strengths and weaknesses of these methods based on the underlying business entity and situation; Describe when discounts or premiums may apply to a business valuation; Determine the impact of different valuation methods and sale structures on the intended buyer (e.g., third party buyers, employees, and/or family members); Demonstrate knowledge of different financing techniques including private annuities, self- canceling installment notes, seller-financing, third-party financing, and employee stock option plans (ESOPs); Describe the structure and tax treatment from the viewpoint of the buyer and seller of private annuities, self-canceling installment notes, seller-financing, third-party financing, and ESOPs; Determine which sales structures (e.g., asset or stock sales, installment sales, asset exchanges, etc.) are most appropriate based on client goals and circumstances Section 9: Client Focus - Retirement Match a specific qualified plan to a unique client situation; Develop asset accumulation strategies in qualified and non-qualified structures (e.g., qualified retirement accounts, individual retirement accounts, and personal taxable accounts); Perform capital needs analysis for retirement objectives set by a client; Explain the impact of return sequencing on sustainability of retirement distributions; Demonstrate an understanding of analytical forecasting techniques, such as Monte Carlo simulation, in projecting retirement outcomes; Calculate required minimum distributions (RMD); Describe sustainable withdrawal rate methodologies given various conditions and scenarios and apply sustainable withdrawal-rate decision rules in order to modify distributions based on various events or outcomes; Explain net unrealized appreciation (NUA) rules and applications, and calculate tax liability on a NUA distribution; Establish tax-aware withdrawal strategies for various types of tax-deferred and after-tax accounts; Demonstrate knowledge of asset-location issues (i.e., asset placement among various tax-deferred and after-tax accounts) and demonstrate skill to target appropriate placement among various tax-deferred and after-tax accounts; Describe Roth IRA conversion rules, and develop strategies that integrate a Roth IRA conversion with other advanced planning techniques; Demonstrate an understanding of stretch IRA planning; Calculate inherited retirement account required minimum distributions (RMD) and apply the correct distribution table; Explain post-death distribution requirements relative to beneficiary type ________________________________________________________________________ Part IV: Legacy Planning Section 10: Charitable Giving Plan charitable contributions to maximize deductions based on client goals; Describe and differentiate between the rules for and taxation of contributions to and distributions from charitable lead and charitable remainder trusts; Determine in which situations a particular charitable planning vehicle is most appropriate; Describe unrelated business taxable income (UBTI) as it pertains to the taxation of the operation of investments of a private foundation Section 11: Estate Planning and Wealth Transfer Demonstrate knowledge of estate tax rates and calculations, and calculate estate tax liability; Review and analyze the estate tax return (Form 706); Demonstrate knowledge of gift tax rates and calculations, and review and analyze the gift tax return (Form 709); Demonstrate knowledge of generation skipping tax (GST) rates and calculations, and (GST) liability; Determine methods to reduce the estate tax liability; Explain the concept and tax results of income in respect of a decedent (IRD); Describe valuation discounts and their applicability under different scenarios; Demonstrate knowledge of the use of trusts in estate planning, and compare and contrast advantages and disadvantages of different trusts given client objectives; Identify fiduciary and trustee issues for estate planning and administration; Evaluate the use of insurance in the estate plan; Describe estate planning and tax implications for holding qualified retirement plan and IRA assets in an estate at death; Describe intra-family loan strategies and their tax implications; Analyze the advantages, disadvantages, and limitations of using partnerships in the estate plan; Explain the impact of corporate and business assets in the estate plan; Identify estate planning strategies available to high-net-worth individuals with large concentrated positions of highly illiquid assets; Develop specific solutions appropriate to a legacy wealth-transfer plan Human Dynamics Section 1: Ethics Analyze the relationships among firm, advisor, client, and other applicable professionals given the responsibility of each CPWA certificant to place the client’s financial interests first; Understand requirements to disclose all compensation received for services provided and all potential conflicts of interest; List all requirements necessary to maintain the CPWA certification, and describe the rules and consequences pertaining to violations of IWI’s Code of Professional Responsibility Section 2: Applied Behavioral Finance Demonstrate knowledge of published neurological research in the field of behavioral finance, and describe conclusions from these studies related to financial and investment decision making; List and describe various behavioral biases based on existing beliefs and how they may impact financial decision making and behavior; List and describe various behavioral biases based on information processing and how they may impact financial decision making and behavior; List and describe various behavioral biases based on emotions and how they may impact financial decision making and behavior; List and describe primary investor personality types, and explain how they may impact client decision making Section 3: Family Dynamics Identify key family roles and positions, as well as special circumstances and unique situations; and develop plans that align individuals with appropriate family roles; Identify family dynamics and sources of conflicts; Develop a family education plan appropriate to meet stated needs and objectives; Identify the elements necessary to conduct a successful family meeting and help clients develop a family mission statement; Knowledge of when and how to incorporate the appropriate family office infrastructure tailored to the family’s wealth level and objectives Part II: Wealth Management Strategies Section 4: Tax Strategies and Planning Identify transactions and situations that result in AMT and develop strategies to avoid or minimize AMT and/or maximize the use of AMT credits; List interest expense classifications and applicable limitations including the treatment of mortgage interest, investment interest expense, and interest on business activities, and recommend alternative strategies to maximize current interest deductibility; Understand taxation of investment transactions including capital gains, qualified and non-qualified dividends, and wash sale rules; Calculate the tax liability of executive stock option exercises; Demonstrate an understanding of tax basis rules and gains from disposition as they apply to pass-through entities owned by individuals; Identify strategies to defer gains on various property transactions, including like-kind exchanges and sales of certain small business stock; Demonstrate tax issues and planning strategies common to high-net-worth clients including intra- family tax planning opportunities and strategies for shifting income and taxation; Demonstrate knowledge of trust taxation Section 5: Portfolio Management Skill to evaluate, implement and monitor hedging strategies including options and non-options hedging, and non-hedging strategies; Demonstrate the skill to calculate and evaluate after-tax returns and tax efficiency for various asset classes and categories; Demonstrate knowledge and skill to implement tax gain and loss harvesting strategies; Evaluate bond and equity managers on an after-tax basis; Position asset classes and managers by the tax characteristics of investment entities including personal taxable assets, qualified retirement accounts, and individual retirement accounts (IRAs); Integrate an appropriate mix of alternative investments into a portfolio based on a client’s objectives, time horizon, risk tolerance, and applicable constraints; Demonstrate knowledge of the distinguishing characteristics of socially responsible investing (e.g., shareholder advocacy, inclusive or exclusive strategies, green investing); Demonstrate knowledge of liability-driven and goal-driven investing for individual portfolios Section 6: Risk Management and Asset Protection List asset and creditor protection strategies and entities including the advantages, disadvantages, and legality of each; Compare various entities used in asset and creditor-protection strategies; Describe common transfer techniques and differentiate between legal transfers and fraudulent conveyance; Describe and analyze domestic trusts as an asset protection tool, and define and differentiate between self-settled trusts, grantor trusts, dynastic trusts, and domestic asset protection trusts; Describe and analyze off-shore trusts as an asset-protection strategy Part III: Client Specialization Section 7: Client Focus - Executives Develop option exercise strategies for both incentive and non-qualified option awards based on client objectives; Describe the consequences, and advantages and disadvantages of making a Section 83(b) election as it pertains to executive stock options; Demonstrate an understanding of the calculation, execution, and value of a cashless exercise, an exercise and hold strategy, and a pyramiding (stock swapping) strategy; Develop an appropriate strategy and prioritize the interaction of incentive and non-qualified stock options by incorporating risk and reward analysis based on client objectives; Differentiate between different equity compensation plans including restricted stock, phantom stock, and performance share plans; and describe the tax implications of each; Identify regulatory rules and restrictions governing a corporate executive’s publicly held stock including short-swing profits, insider information, exercise windows, and other policies unique to the issuing company; Calculate tax results of various outright stock sales over multiple time periods in order to develop tax efficient strategies and action plans; Demonstrate knowledge of the value, risks, and tax implications of diversifying concentrated stock portfolios, such as cashless collars, prepaid variable forward contracts, portfolio margin strategies, exchange funds, and charitable remainder trusts; Demonstrate knowledge of the value, risks, and tax implications of utilizing Section 10b-5(1) plans Section 8: Client Focus - Closely Held Business Owners Analyze closely held business exit strategies and succession plans; Determine which buy-sell agreements are most appropriate based on entity structure and a client’s needs including intended exit strategy; Differentiate among the different valuation methodologies and list strengths and weaknesses of these methods based on the underlying business entity and situation; Describe when discounts or premiums may apply to a business valuation; Determine the impact of different valuation methods and sale structures on the intended buyer (e.g., third party buyers, employees, and/or family members); Demonstrate knowledge of different financing techniques including private annuities, self- canceling installment notes, seller-financing, third-party financing, and employee stock option plans (ESOPs); Describe the structure and tax treatment from the viewpoint of the buyer and seller of private annuities, self-canceling installment notes, seller-financing, third-party financing, and ESOPs; Determine which sales structures (e.g., asset or stock sales, installment sales, asset exchanges, etc.) are most appropriate based on client goals and circumstances Section 9: Client Focus - Retirement Match a specific qualified plan to a unique client situation; Develop asset accumulation strategies in qualified and non-qualified structures (e.g., qualified retirement accounts, individual retirement accounts, and personal taxable accounts); Perform capital needs analysis for retirement objectives set by a client; Explain the impact of return sequencing on sustainability of retirement distributions; Demonstrate an understanding of analytical forecasting techniques, such as Monte Carlo simulation, in projecting retirement outcomes; Calculate required minimum distributions (RMD); Describe sustainable withdrawal rate methodologies given various conditions and scenarios and apply sustainable withdrawal-rate decision rules in order to modify distributions based on various events or outcomes; Explain net unrealized appreciation (NUA) rules and applications, and calculate tax liability on a NUA distribution; Establish tax-aware withdrawal strategies for various types of tax-deferred and after-tax accounts; Demonstrate knowledge of asset-location issues (i.e., asset placement among various tax-deferred and after-tax accounts) and demonstrate skill to target appropriate placement among various tax-deferred and after-tax accounts; Describe Roth IRA conversion rules, and develop strategies that integrate a Roth IRA conversion with other advanced planning techniques; Demonstrate an understanding of stretch IRA planning; Calculate inherited retirement account required minimum distributions (RMD) and apply the correct distribution table; Explain post-death distribution requirements relative to beneficiary type Part IV: Legacy Planning Section 10: Charitable Giving Plan charitable contributions to maximize deductions based on client goals; Describe and differentiate between the rules for and taxation of contributions to and distributions from charitable lead and charitable remainder trusts; Determine in which situations a particular charitable planning vehicle is most appropriate; Describe unrelated business taxable income (UBTI) as it pertains to the taxation of the operation of investments of a private foundation Section 11: Estate Planning and Wealth Transfer Demonstrate knowledge of estate tax rates and calculations, and calculate estate tax liability; Review and analyze the estate tax return (Form 706); Demonstrate knowledge of gift tax rates and calculations, and review and analyze the gift tax return (Form 709); Demonstrate knowledge of generation skipping tax (GST) rates and calculations, and (GST) liability; Determine methods to reduce the estate tax liability; Explain the concept and tax results of income in respect of a decedent (IRD); Describe valuation discounts and their applicability under different scenarios; Demonstrate knowledge of the use of trusts in estate planning, and compare and contrast advantages and disadvantages of different trusts given client objectives; Identify fiduciary and trustee issues for estate planning and administration; Evaluate the use of insurance in the estate plan; Describe estate planning and tax implications for holding qualified retirement plan and IRA assets in an estate at death; Describe intra-family loan strategies and their tax implications; Analyze the advantages, disadvantages, and limitations of using partnerships in the estate plan; Explain the impact of corporate and business assets in the estate plan; Identify estate planning strategies available to high-net-worth individuals with large concentrated positions of highly illiquid assets; Develop specific solutions appropriate to a legacy wealth-transfer plan