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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. Economy wide risks - consumer spending - economy






3. Across and within asset classes - internationally as well as domestically - find investments with low correlation R2 - asset correlation changes over time - for stocks diversify across and within sectors - diversify over time with dollar cost averagi






4. Review at least annually to manage gains/losses - clients adding or taking distributions require more frequent monitoring






5. Purpose of the funds to be invested - investment objectives - responsibilities of the investment manager - responsibilities of the client - set allocation policy based on targets or ranges






6. Recovery rate (how much get back if default)


7. 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






8. Accumulate wealth over time by spending less than they earn - invest 20% of income per year - incomes are about average - advanced degrees






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






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






11. Payoff-expected value






12. High income upside potential - low base salary - greater requirement to sell in many cases - including cold call - cutting edge investment thinking - products - and support - SEC licensing required - potential long term commitment required






13. Restricted and unrestricted funds - characteristics and constraints






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






15. 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






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






17. Who wants significant input on investment selections or who has very few transactions and very little change in circumstances






18. Appropriate credit quality and interest rate risk - no individual corporate issuer more than 5%






19. Never - monthly - quarterly - if more than 5% from target at month's end - if more than 5% from target at quarter's end






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






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






22. Accumulate wealth over time by spending less than they earn - invest 20% of income per year - incomes are about average - advanced degrees






23. Buy low and sell high






24. 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






25. Sell assets with losses and offset with sales of those with gains - rebalance in tax advantaged accounts (IRA or 401K)






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






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






28. 0 company could fail






29. Investment banks - financial consultants






30. Value of the worst possible outcome - measures maximum potential loss - over a specific time horizon - at a given probability - used widely in the management and regulation of financial institutions






31. Economy wide risks - consumer spending - economy






32. Get paid on hourly basis for advice






33. Monitoring performance and adherence to policy - reviewing IPS on regular basis






34. Asset allocation and diversification






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






36. Get paid on hourly basis for advice






37. Square root of variance/initial investment






38. 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






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






40. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. prospective purchasers should much prefer sinking prices






41. How far does it stray? - do other client characteristics justify the variance? what changes need to be made to correct? - how long? - - cost in taxes and transaction costs? - worth it to reallocate?






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






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






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






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






46. Execution at 18 mo intervals provides most of the benefits with less costs






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






48. Reduce risk and can increase returns






49. Bringing portfolio back to our allocation policy when market forces or life events changed the mix






50. Monitoring performance and adherence to policy - reviewing IPS on regular basis