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NISM-Series-XVII: Retirement Adviser Certification Examination

 

Unit 1: Fundamental Concepts in Retirement Planning

1.1 Understand the need for retirement planning

1.1.1. How retirement planning is moving from “defined benefits” to “defined contribution”

1.1.2. Know the need to apportion current income between current and future expenses

1.1.3. Know the importance of budgeting in providing for current and future expenses and needs

1.1.4. Increasing Life expectancy

1.2 Know the basic financial concepts associated with retirement planning

1.2.1. Understand the impact of inflation and time value of money

1.2.2. Know the effect of compounding on returns

1.2.3. Understand the benefit of market linked returns vs fixed returns

1.3 Know the features of the retirement goal

1.3.1. It is typically long term

1.3.2. It involves the creation of a large corpus

1.3.3. The goal can be met only out of savings and investments

1.4 Know the advantages and importance of starting retirement savings early

1.5 Understand the risk of underestimating retirement goals

1.6 Understand the emotional aspects of retirement, beyond the financial aspects, and the need to be prepared for it

 

Unit 2: Financial Markets & Investment Products

2.1 Understand the need for making investments to reach retirement goals

2.2 List the difference between saving and investment

2.2.1 Trade-off between risk and return

2.3 Know the different types of asset classes and sub-asset classes

2.4 Describe the features of different asset classes, with special focus on risk and return

2.5 Understand the returns from different types of asset classes

2.5.1 Nature of return: Fixed return Vs variable returns

2.5.2 Components of total returns: dividend/interest and capital gains or loss

2.6 Understand the risks associated with different investments and the risk and return trade-off

2.7 Understand the factors that affect the selection of an asset class for investment (risk taking ability, need for growth or income, need for liquidity, investment horizon)

2.8 Understand the impact of macro-economic factors such as falling interest rates, etc. on the performance of different asset classes

2.9 Understand the concept of asset allocation and its impact on the investor portfolio risk and return (Strategic and Tactical Asset Allocation)

2.10 Know the Indian Financial System and the features of common investment products

2.10.1 Debt securities

2.10.2 Equity securities

2.10.3 Deposit schemes of the government through the post office such as PPF,

2.10.4 Bank deposits

2.10.5 National Pension System

2.10.6 Atal Pension Yojna

2.10.7 Gold and associated schemes

2.10.8 Other deposits,

2.10.9 Mutual fund schemes (Include ETFs also)

2.10.10 Investment linked insurance products

2.10.11 Real Estate

2.10.12 Annuities

 

Unit 3: Retirement Planning Process

3.1 Know to evaluate the client’s current situation

3.1.1. Lifecycles and its impact on saving and investing for retirement

      1. Income and expense and different stages
      2. Challenges specific to different stages: expected and unexpected
      3. Model asset allocation suitable for each stage

3.1.2. Understand the process of budgeting

3.2 Learn the process of setting the retirement goal

3.2.1. Understand the change in expense profile in retirement

3.2.2. Define the income required in retirement

      1. Income replacement method
      2. Expense method

3.2.3. Identify when the funds will be required (investment horizon)

3.2.4. Determine the asset allocation and Calculate the corpus required to generate the income (Time Value of Money, PV, FV, Real rate of return, Pre-tax and Post-tax return)

3.2.5. Consider the investments already made to arrive at the shortfall that needs to be funded. This is the retirement goal

3.2.6. Calculate the periodic savings and investment required to reach the retirement goal

3.2.7. Evaluate savings required relative to current financial situation and make adjustments where required

3.3 Learn the process of matching investor’s needs to investment

3.3.1. Evaluate available investments for suitability based on the ability and willingness to take risk and adequacy of returns

      1. Risk profiling of investors: Age, dependents, assets and liabilities, income levels and income security, investment horizon, risk appetite and tolerance

3.3.2. Make and monitor the investments

3.3.3. Assess any change in retirement plans and income requirement whenever there is a life event or significant change in income and expense

3.3.4. Make course corrections if required in the allocations and investments made

3.3.5. Alter the asset allocation as retirement comes closer and term to goal reduces

3.4 Know Post-retirement/ Distribution Stage activities

3.4.1. List expected expenses and assess the need for income

3.4.2. Convert assets into income streams based on the need

3.4.3. Evaluate the need for part-time employment, if income falls short

3.4.4. Assess the adequacy of insurance available to the retiree

3.4.5. Create a budget to live, given available income

3.5 List the risks to retirement plan and know how to manage it

3.5.1. Underestimating retirement needs

3.5.2. Lower than planned savings and investment

3.5.3. Investing too conservatively or aggressively

3.5.4. Lower growth in investments

3.5.5. Fall in annuity rates and interest rates at the time of purchase/investment

3.5.6. Risks of Early Withdrawal

3.6 Understand the need to maintain and update plan

3.6.1. In response to change in needs

3.6.2. In response to change in life cycle stage

3.6.3. In response to life events

3.7 Behavioural biases in investment decision making

 

Unit 4: Retirement Planning Products: National Pension System

4.1 Know the features and benefits of National Pension System

4.1.1. List the various models available under the NPS for different categories of subscribers

4.1.2. Know the types of accounts available under NPS (Tier I and Tier II)

4.1.3. Know the terms and definitions related to the NPS

4.1.4. List the intermediaries and their functions

4.1.5. Know the fees and charges related to the scheme

4.1.6. NPS offer document

4.2 Know how the NPS works

4.2.1. Know how the funds accumulate the corpus to provide retirement income

4.2.2. Understand the different investment options: features, risks, returns

4.2.3. Understand how the retirement income will be generated (Annuities)

4.2.4. Know the different types of annuities available

4.2.5. Know the options available at the time of exit (deferred withdrawal, deferred annuity, continuation of contribution etc.)

4.3 Know the basic requirements for investing in the NPS

4.3.1. KYC formalities

4.3.2. PAN Card

4.3.3. Bank account

4.4 List the procedure for investing in NPS

4.4.1. Comply with eligibility requirements

4.4.2. Apply for PRAN

4.4.3. Making the application : Physical and online

      1. Tier 1 and Tier II accounts

4.4.4. Select asset allocation, fund manager and other options

      1. Process for changing the selections made

4.4.5. Make the contribution

4.4.6. Monitor the investment and register changes to applicant details

4.4.7. Know the process for investment-related activities

      1. Switching from one fund manager to another
      2. Switching from one point of presence to another
      3. Switching between active and auto choice
      4. Unfreezing a frozen account
      5. Making and changing nominations
      6. Exiting the scheme before normal retirement age
        1. In the lifetime of the subscriber
        2. On the death of the subscriber
      7. Registering a grievance related to NPS

4.5 Know the tax aspects of investing in NPS

4.5.1. At the time of making the contributions

4.5.2. At the time of exiting the NPS

4.5.3. At the time of receiving a pension income

 

Unit 5: Evaluating Fund Performance & Fund Selection

5.1 Know the calculation of Return on Investment

5.2 Understand the different types of return calculations

5.2.1. Absolute returns

5.2.2. Annualized returns

5.2.3. CAGR

5.2.4. XIRR

5.3 Know the different measures of risk in an investment and their interpretation

5.3.1. Standard deviation

5.3.2. Beta

5.3.3. Sharpe Ratio

5.4 Understand the concept of benchmark

5.5 Know the different ways in evaluating the performance of the fund

5.5.1. Relative to benchmark

5.5.2. Relative to peer group performance

5.6 Know the steps in matching investor’s retirement needs to product

5.6.1. Understand the advantage to the long-term investor in investing through funds

      1. Know the advantages of investing through funds vs direct investing
        1. Diversification
        2. Selection of investments
        3. Professional management
        4. Automatic rebalancing (Auto option)
      2. Advantage of total return from fixed income securities vs fixed returns from deposits
        1. Earn total returns from gains in value
        2. Earn better inflation-adjusted returns
        3. Pre-tax v/s Post-tax compounding

5.6.2. Suggest suitable fund based on the investor’s needs and profile

 

Unit 6: Retirement Planning Products: Other Investment Products

6.1 Know the other mandatory savings products and their features: contributions, returns, loans, withdrawals

6.2 List and describe voluntary investment products available to investors

6.2.1. Accumulation stage products: Direct equity, Bonds and debentures, Provident Fund, Superannuation, Gratuity Schemes, PPF, Post office savings schemes, Bank deposits and other deposits, Mutual fund products, Investment linked Insurance products. Retirement saving deferred annuities

6.2.2. Distribution stage products: retirement income immediate Annuities, Government schemes offered through the post office and banks, bank deposits and other deposits, mutual fund products,

6.2.3. Reverse Mortgage Scheme

6.3 Taxability aspects on various products

 

Unit 7: Retirement Planning Strategies

7.1 Know the strategies that are useful to investors in executing their retirement plan

7.1.1. Have strategies to bridge the retirement income gap, if any: Postpone retirement, take on part-time employment to support retirement income, cut-back on expenses to align to available income

7.1.2. Use periodic investments as a way to average out investment costs and manage market volatility.

      1. Invest periodically to average costs and reduce the risk from market volatility
      2. Monetize the assets created for retirement over a period of time to avoid market volatility

7.1.3. Generate retirement income from multiple sources to offset the drawbacks of different sources

7.1.4. Demarcate post-retirement investments into different categories (bucket strategy): first level of investments held to meet immediate expenses from investments in cash and equivalents, second level to hold investments that will replenish the first bucket from income-oriented assets and third level of investments in growth-oriented assets

7.1.5. Strategizes to take advantage of tax advantages in the accumulation and distribution stages of retirement

7.1.6. Automate investments as far as possible to make sure savings targets are met and money is not idle

 

Unit 8: Special Considerations in Retirement

8.1 Understand the implications of specific situations on retirement planning and how they are to be managed

8.1.1. Loans: Existing obligations and new loans

8.1.2. Employment in retirement

8.1.3. Medical conditions and needs (Health, Disability, Long-term care)

8.1.4. Providing for spouse

8.1.5. Tax impact of retirement benefits and corpus

8.1.6. Estate planning

8.2 Know the documents necessary for effective retirement planning

8.2.1. Income tax returns

8.2.2. Investment account statements, pass books, deposit receipts and others

8.2.3. Property documents

8.2.4. Insurance documents

8.2.5. Power of Attorney, Nominations, assignment and other documentation for identifying beneficiaries

8.2.6. Health care insurance paperwork

8.2.7. Wills, trusts and other documents linked to estate planning

 

Unit 9: Regulations & Regulators

9.1 Know the Indian Regulatory System

9.2 Understand the role of the PFRDA

9.3 Know other regulators involved: SEBI, RBI, IRDAI, Ministry of Finance

9.4 Know the important regulations for retirement advisers

9.4.1. PFRDA Act 2013

9.4.2. PFRDA (Retirement Adviser) Regulations, 2016

9.4.3. PFRDA (Point of Presence) Regulations, 2015

9.4.4. PFRDA (Central Record Keeping Agency) Regulations, 2015

9.4.5. PFRDA (NPS Trust) Regulations, 2015

9.4.6. PFRDA (Pension Fund) Regulations, 2015

9.4.7. PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015

9.5 Ethics beyond regulations, fiduciary duties,

9.6 Know the grievance redressal mechanisms available to investors

 

 

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