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






2. 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






3. Restricted and unrestricted funds - characteristics and constraints






4. The theoretical rate of return of an investment with no risk of financial loss - i.e. short dated domestic govt bond (default benchmark)






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


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






7. Paid for U.S. corp or qualified foreign corp - taxed at 15% for those in tax bracket of 25% or more - taxed at 0% for those in tax bracket less than 25% - holding period requirement






8. Paid for U.S. corp or qualified foreign corp - taxed at 15% for those in tax bracket of 25% or more - taxed at 0% for those in tax bracket less than 25% - holding period requirement






9. 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






10. Investment banks - financial consultants






11. Weighted average of the expected returns of its components






12. Brokerages - insurance companies






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






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






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






16. 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?






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






18. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






19. Target: a proportion for allocation under 'normal' circumstances - range: an allowable band for allocation under variable circumstances






20. Weighted average of the expected returns of its components






21. Income and capital gain/loss in value - income is passed through to shareholders - gain/loss occurs on the mutual funds shares as well as on the underlying fund portfolio - fund portfolio gains are passed to shareholders; losses are retained in the f






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. Payoff-expected value






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






25. Economy wide risks - consumer spending - economy






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






27. Probability theory






28. In a fee based environment - base salary typically has a sig. variable component in the form of commissions or bonuses - variable compensation determined by quantitative and qualitative factors - similar to fee arrangement for client






29. Target: a proportion for allocation under 'normal' circumstances - range: an allowable band for allocation under variable circumstances






30. Assets are comparable - style - type of securites - value and growth






31. Don't want stocks highly correlated if trying to diversify






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






33. 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?






34. 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






35. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






36. 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






37. 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






38. Fees or expenses - tax consequences






39. 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






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






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






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






43. In a fee based environment - base salary typically has a sig. variable component in the form of commissions or bonuses - variable compensation determined by quantitative and qualitative factors - similar to fee arrangement for client






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






45. Brokerages - insurance companies






46. 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






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






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






49. Restricted and unrestricted funds - characteristics and constraints






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