Five ICWIM Suitability Case Studies
The ICWIM Chapter 7 framework (six-step cycle, three Rs of risk, MiFID II concepts) is one thing to memorise — applying it to real client scenarios is where most candidates fumble. This guide works through five realistic cases. Each one shows the right answer AND the common-mistake answer, because the exam loves distractors that LOOK reasonable but mis-weight the framework.
The pattern. Exam questions never describe a "perfect" client. They give you conflicting facts — high tolerance but low capacity; clear goal but inadequate income; competent but vulnerable in one dimension. Your job is to spot which constraint binds.
Recap: the three Rs
- Risk tolerance (attitude) — how much risk the client is WILLING to take (psychological)
- Risk capacity — how much risk the client CAN AFFORD to take (objective financial)
- Risk required — how much risk the client NEEDS to take to achieve their goals
When they conflict, take the LOWER of tolerance and capacity. If required exceeds either, the goal needs revision (save more, extend horizon, accept smaller goal).
Case 1: Aisha, 26, software engineer in Dubai
The facts
- Age 26, single, no dependants, UAE-resident expat
- Salary AED 280,000 net of tax (Dubai), expects salary growth ~5-7% pa
- £15,000 emergency fund (3 months expenses)
- No debt, no property, no existing investments
- Just inherited £40,000 from grandmother in UK
- Goal: build wealth for "long term" — no specific target
- Psychometric questionnaire: HIGH risk tolerance
- Knowledge: limited — has heard of "stocks and shares" but never invested
Apply the framework
| Dimension | Assessment |
|---|---|
| Risk tolerance | HIGH (psychometric) |
| Risk capacity | HIGH (long horizon, no dependants, growing income, low fixed costs) |
| Risk required | UNCLEAR (no specific goal — "build wealth" is too vague) |
| Knowledge & experience | LOW |
The right answer. Before recommending products, the adviser must address the KNOWLEDGE gap and the UNCLEAR objectives. Step 2 of the planning cycle (gathering data) isn't complete until risk required is quantified through goal-setting. Suitable recommendations would: (1) clarify goals with the client; (2) start with a diversified passive equity portfolio matching her high tolerance/capacity; (3) educate her about the products via simple terms; (4) document her low experience and limit complex products until knowledge develops.
Common mistake. Recommending leveraged products or complex derivatives because she "has high tolerance and high capacity". Knowledge and experience are a SEPARATE dimension under MiFID II suitability — even a willing, capable client needs to understand the product. Complex products fail the appropriateness test for novices.
Case 2: Mark and Susan, 58 and 56, pre-retirement
The facts
- Married, two grown children (financially independent)
- Mark: managing director, salary £180k, plans to retire at 65
- Susan: part-time consultant, £40k
- Joint pension pots: £1.4m (Mark) + £300k (Susan) — both DC
- Mortgage: £80k outstanding on £900k house
- £250k cash savings
- Goal: maintain current lifestyle (£100k/year net) in retirement, retire at 65
- Risk tolerance (psychometric): MEDIUM-LOW (became more conservative after 2022 losses)
Apply the framework
| Dimension | Assessment |
|---|---|
| Risk tolerance | MEDIUM-LOW |
| Risk capacity | HIGH (substantial pots, surplus income, paid-down mortgage) |
| Risk required | LOW-MEDIUM (existing pots can sustainably fund £100k/year via FAD; modest growth needed) |
The right answer. Risk tolerance binds — even though capacity is high and required is low-medium, the client's tolerance is medium-low. Take the LOWER of the three. Recommend a portfolio matched to medium-low tolerance (~40-50% equity), even though their capacity could support more. Their goal is achievable at this level. Don't push for unnecessary risk.
Common mistake. Recommending higher-equity allocation because "they can afford the risk and don't need much to meet the goal so let's grow the pot". This violates the principle that capacity does NOT override stated tolerance. The CISI exam consistently expects: respect the lower constraint.
Case 3: Vikram, 45, entrepreneur with conflicting goals
The facts
- Sold his tech business for £4m net, looking to "make it last forever"
- Single, no children, but supporting parents (£2k/month allowance) and brother's family modestly
- Wants £150k/year income
- Wants £1m put aside for a future startup (3-year horizon)
- Wants legacy of £500k to nephew on Vikram's death
- Tolerance: HIGH (entrepreneur background, used to volatility)
- Currently 100% in cash earning 4% — about to drop with rate cuts
Apply the framework
| Dimension | Assessment |
|---|---|
| Risk tolerance | HIGH |
| Risk capacity | HIGH overall — BUT must segment by goal |
| Risk required | VARIES BY GOAL — different parts of the portfolio need different approaches |
The right answer. Goal-based segmentation. Mental-account the £4m: (1) £1m short-term in low-risk cash/gilts for the startup pot (3 years too short for equity risk); (2) ~£500k as the "income engine" in moderate-risk balanced portfolio for sustainable withdrawals; (3) £2.5m as a higher-equity long-term growth portfolio supporting the £150k income and £500k legacy. Same client, different risk approach per goal — this is "goals-based wealth management" and is increasingly expected by the exam.
Common mistake. Applying ONE risk profile across the whole £4m. This breaks goal-based planning. The startup pot has a hard 3-year deadline — losing 30% in year 2 destroys the goal regardless of long-term recovery potential. Single-portfolio thinking misses this.
Case 4: Eleanor, 72, recently widowed
The facts
- Husband died 4 months ago of cancer
- Inherited £800k in mixed assets + family home (£600k)
- State pension £11k/year
- Previously her husband handled all finances; she's never managed investments
- Daughter (45) accompanying her, but Eleanor signs documents
- Expressed wish to "just keep things simple, like he had them"
- Says she wants £30k/year income and to leave the house to the daughter
- Showing some cognitive slowing — repeats questions occasionally
Apply the framework
| Dimension | Assessment |
|---|---|
| Vulnerability indicators | MULTIPLE — bereavement (life event), financial inexperience (capability), early cognitive slowing (health) |
| Risk tolerance | LOW (stated preference for simplicity) |
| Risk capacity | HIGH (substantial inherited assets, modest income needs) |
| Risk required | LOW (income easily sustained from modest portfolio) |
The right answer. Vulnerability is the dominant factor. The FCA Vulnerable Customer Guidance applies: slow the pace, document everything, use plain language, consider written confirmations, possibly suggest an attorney/power-of-attorney conversation. Eleanor's tolerance binds (low). Recommend a simple, low-volatility income portfolio. Critically: don't rush the engagement — bereavement is a high-risk window for both advisor missteps and unscrupulous third parties.
Common mistake 1. Treating Eleanor as a standard low-tolerance client without addressing the vulnerability flags. Vulnerability isn't just "older clients"; it's the four drivers (health / life events / resilience / capability). Eleanor has THREE of the four. Adapt the process.
Common mistake 2. Engaging the daughter as the primary decision-maker. Even if Eleanor accepts daughter's help, EELEANOR signs documents. The advisor's duty is to Eleanor, not the family. Document her clarity at each step.
Common mistake 2. Engaging the daughter as the primary decision-maker. Even if Eleanor accepts daughter's help, EELEANOR signs documents. The advisor's duty is to Eleanor, not the family. Document her clarity at each step.
Case 5: Tom, 68, retired, in drawdown
The facts
- Retired 3 years ago with £600k DC pot
- Currently in flexi-access drawdown taking £40k/year
- Pot has declined to £510k after 2 years of withdrawals + flat markets
- Still has £80k cash buffer (~2 years living expenses)
- £35k state pension and small DB on top
- Goal: maintain £40k/year withdrawal indefinitely; leave residual to children if possible
- Tolerance: MEDIUM
- Health: good but family history of heart issues
Apply the framework
| Dimension | Assessment |
|---|---|
| Sequencing risk | ELEVATED — drawing 7.8% of remaining pot; sustained drawdown rate of 5%+ rapidly threatens sustainability |
| Risk of ruin | MEANINGFUL given current trajectory |
| Risk tolerance | MEDIUM |
| Risk capacity | DECLINING — pot shrinkage reduces ability to absorb future losses |
| Risk required | Need to sustain ~6-7% real return to maintain pot at current withdrawal — high for medium risk |
The right answer. Conflict between Required (high) and Tolerance/Capacity (medium and declining). The framework gives clear guidance: either accept lower withdrawals (£30-35k), or partial annuitisation to lock in the income floor for essential expenses, freeing the residual pot to remain invested at a moderate risk level. Don't push for higher equity to "make up the gap" — sequencing risk in years 4-5 of drawdown is exactly what destroys portfolios. Cash buffer should be maintained (2-3 years).
Common mistake. Increasing equity allocation to "earn back" the losses. This is the textbook drawdown trap. When your pot is shrinking AND you're withdrawing, raising risk increases the probability of ruin disproportionately. The CISI/CFA expected answer is always: reduce withdrawals OR partial annuitise OR both. Don't fight sequencing risk by adding more sequencing risk.
What these cases share
- Bind on the LOWER of tolerance and capacity. Cases 2, 4 demonstrate. The exam REWARDS conservatism when tolerance is below capacity.
- Goal-based segmentation overrides single-portfolio thinking. Case 3 demonstrates. The exam increasingly expects this approach.
- Vulnerability is a dominant filter. Case 4 demonstrates. Three of four vulnerability drivers should reshape the process, not just the product.
- Knowledge & experience is a SEPARATE dimension. Case 1 demonstrates. High tolerance + high capacity ≠ complex products if knowledge is low.
- Sequencing risk in drawdown is its own animal. Case 5 demonstrates. Solutions involve withdrawal management or annuitisation, NOT raising risk.
Common exam-question patterns these scenarios prepare you for
| Pattern | What it's testing |
|---|---|
| "What's the FIRST step?" | Whether you identify the binding constraint before recommending products. Often the answer is "gather more data" / "clarify the goal", not a product recommendation. |
| "Which is the MOST suitable recommendation?" | Whether you respect the lower of the three Rs. Answer keys avoid "push risk higher than tolerance allows". |
| "What does the adviser need to consider?" | Look for vulnerability indicators, knowledge gaps, conflicting objectives — usually multiple things, with "all of the above" or similar as correct. |
| "How should the adviser respond when X happens?" | Slow-down responses (request written confirmation, schedule follow-up, document the issue) usually beat fast actions in vulnerable-client scenarios. |
Drill these patterns
icwim.com's ICWIM Ch 7 has 54+ questions that test exactly these suitability patterns. Pair with our Chapter 7 deep dive for the framework and these cases for applied judgement.
Full ICWIM prep £49 — or the Cat 5 Pack for £79.
Related guides
- ICWIM Chapter 7 Deep Dive: Suitability Framework — the framework these cases apply
- UK Pensions for ICWIM Ch 8 — pension content for Case 2 + Case 5 scenarios
- Modern Portfolio Theory in 6 Charts — Chapter 6 portfolio construction backbone
- ICWIM 8-week study plan — chapter-weighted prep