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Wealth Management Exam

Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Culture/philosophy - money - risk/reward - career trajectory - other support roles






2. High ethical standards - communication skills - quantitative and analytical skills - attention to detail - work independently - current events - financial matters - client interests






3. Paid as percentage of assets under management for your advice






4. Commission - fee - salary - hourly fee for service






5. Measure of uncertainty about the future payoff to an investment measured over some time horizon and relative to a benchmark






6. Brokerages - insurance companies






7. Reduce risk and can increase returns






8. Reduce risk and can increase returns






9. 1. define your needs and objectives 2. develop investment sections 3. regularly monitor your portfolio 4. validation






10. Increases risk and reduces sharpe (return/risk) ratios






11. Private banker - financial advisor - insurance agent - research analyst - portfolio manager - mutual fund manager/ marketer - hedge fun manager - family office - fund of funds manager - private equity manager/ analyst - financial consultant






12. Bonds: coupon income + changes in price due to changes in interest rates - stocks: dividend yield + growth in earnings + change in p/e






13. Rebalance tax deferred accts first to reduce tax consequences - use tax loss harvesting in your taxable accounts prior to dec. 31 - try taking gains in taxable acct after 12/31 - when taking distributions - sell from overweight classes first - when a






14. Broker/dealer- FINRA - SEC - bank exemption- fed and state regulators - employers - industry associations






15. Used to minimize issuer specific risks - principle of holding more than one risk at a time






16. Asset allocation and diversification






17. Check compliance with concentration rules and diversification in the portfolio - validate the proposal or develop a new asset allocation - revision






18. Payoff-expected value






19. Take account of the bank's strategy - product - recommendations - ideas and investment themes - apply allocation rules - investment proposal






20. Determines broad portfolio composition across asset classes - allocation between stock - bond - and cash determined more than 90% of the variability of returns






21. You would have missed 96% of market's gains






22. Understand incentives of journalists - analysts - and companies in trying to make you take action - stay in the market - continue to add to your portfolio - buy and hold works






23. Assumption of trustee for assets - standard of prudence applied to whole portfolio rather than individual asset - tradeoff between risk and return - trustee can invest in anything that plays an appropriate role in risk/return profile - diversificati






24. Unique risks






25. Define investor profile and liquidity needs over time - identify the proportion of each section in line with your risk profile - investor profile - asset allocation






26. Precise and regular review of each investment section - risk management/ volatility check - arbitration proposals - continuous control






27. Risk by keeping investor with pre-determined risk profile






28. Strategy of reducing idiosyncratic risk by making two investments whose payoffs are unrelated






29. Square root of variance/initial investment






30. Economy wide risks - consumer spending - economy






31. More stability - higher salary - less upside potential for income - may need fiduciary skill - more focus on client service - less on asset gathering - sec licensing likely not required - call primarily on bank customers






32. Brokerages - investment banks - commercial banks - trust departments - large comprehensive accounting firms - independent financial planners - insurance companies






33. Risk by keeping investor with pre-determined risk profile






34. Square root of variance/initial investment






35. Commission - fee - salary - hourly fee for service






36. Ordinary income tax rate (high - up to 35%) - capital gains rate (low - 0% or 15%)






37. The longer the time with payments the more the risk - fixed income (bonds) the more time the more risk - stocks: the longer the time less volatility






38. Buy low and sell high






39. Majority of diversification benefit is reached with a portfolio of as few as 15-20 stocks => no more than 5% of stock portfolio in any one company - depends on definition of market






40. Strategy of reducing idiosyncratic risks by making two investments with opposing risks






41. Fees or expenses - tax consequences






42. Payoff X probability - payoff is the potential return of the investment






43. Get paid on hourly basis for advice






44. Paid per transaction for your idea






45. Investment banks - financial consultants






46. Brokerages - insurance companies






47. Focus on integrated services/ cross selling - may be less pressure to sell than brokerage but more than community bank - blurring lines between brokerage and trust areas






48. The longer the time with payments the more the risk - fixed income (bonds) the more time the more risk - stocks: the longer the time less volatility






49. Restricted and unrestricted funds - characteristics and constraints






50. Payoff-expected value