An execution-only sale occurs when a broker executes a trade without providing financial advice.
* Key Features of Execution-Only Trading:
* The client chooses the investment without guidance.
* The broker only executes the trade (no suitability checks).
* Typically used by experienced investors.
* Regulatory Implications:
* Under FCA rules, execution-only firms are not responsible for investment suitability.
* Clients must confirm they are not receiving advice before execution.
# Reference: FCA Handbook (COBS 10 - Execution-Only Transactions), CISI Wealth & Investment Management.

Prospect theory explains that investors evaluate outcomes relative to a reference point, often the purchase price or a recent portfolio value, rather than focusing solely on final wealth. The value function is typically described as loss averse, meaning losses hurt more than equivalent gains feel good. This creates inconsistent risk attitudes: investors often become risk seeking when facing losses and risk averse when sitting on gains. A practical expression of this is the disposition effect: investors tend to hold losing positions too long to avoid crystallising a loss, while they take profits too quickly to lock in gains and feel the satisfaction of being right.
That behaviour is inconsistent because the risk decision changes depending on whether the investor is in a gain or loss position, even when the underlying prospects of the investment have not improved. CISI-style questions usually test this exact pattern: reluctance to realise losses combined with a tendency to realise gains early, driven by loss aversion and reference dependence.

# Reference: CISI Code of Ethics, CFA Standards of Professional Conduct.

The investment planning process begins by establishing the relationship with the client. This initial stage sets the foundation for everything that follows by clarifying the scope of services, the respective responsibilities of client and adviser, how the adviser is paid, the regulatory status of the adviser, and what information will be required. It also establishes expectations around communication, confidentiality, and ongoing review. Only once the relationship is defined can the adviser conduct an effective fact find, because the client needs to understand why information is being requested and how it will be used to support suitability. Providing product information and creating an action plan occur later, after objectives, constraints, and risk parameters have been established. Gathering client data is crucial, but it logically follows the relationship stage, because the adviser must first agree the engagement and obtain the client's consent to collect and process personal and financial information. CISI exam questions typically test the sequencing: define the engagement first, then gather data, analyse, recommend, implement, and review.

An open-ended fund can create or cancel units based on investor demand.
* Liquidity: Open-ended funds, such as Unit Trusts and OEICs (Open-Ended Investment Companies), continuously issue and redeem shares.
* Pricing: The price is based on the Net Asset Value (NAV).
* Flexibility: The fund manager can adjust the fund size by issuing or cancelling units.
# Reference: FCA Handbook, CISI Wealth & Investment Management (Fund Structures).