Test your basic knowledge |

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






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






3. Private banks - mutual funds - hedge funds - trust companies - brokerages






4. 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?






5. 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






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






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






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






9. Buy low and sell high






10. 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






11. Weighted average of the expected returns of its components






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






13. Representation in domestic and international - large - mid - small cap - no individual stock more than 5% of total portfolio






14. General economic conditions - tax consequences of change - role of asset w/ in total portfolio - total return including income and principal - other resources - need for liquidity - income - preservation or appreciation of principal






15. 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






16. Probability theory






17. 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






18. 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






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


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






21. Private banks - mutual funds - retail brokerages - hedge/private equity funds






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






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






24. Square root of variance/initial investment






25. Asset allocation and diversification






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






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






28. Inherited wealth - suddenly wealthy - endowments and foundations






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






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






31. Brokerages - insurance companies






32. Fees or expenses - tax consequences






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






34. Inherited wealth - suddenly wealthy - endowments and foundations






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






36. 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






37. 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






38. St. dev. - correlation or R2 - VaR- value at risk






39. Invest some fixed amount of money at regular intervals - allows to buy more shares when prices are low - not market timing doesn't work - reduces down side risk of putting lump sum in prior to a drop in value






40. Reduce risk and can increase returns






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






42. Income (dividends - interest - rents) - capital gain/ loss in value






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






44. Probability X squared deviation of payoff from expected value






45. 0 company could fail






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






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






49. Private banks - mutual funds - hedge funds - trust companies - brokerages






50. 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?