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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. Brokerages - insurance companies






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






3. Selling loses so you avoid capital gain taxes






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






5. 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?






6. 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






7. Sum of probabilities - probability weighted sum of the possible outcomes






8. 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






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






10. 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






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






12. 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?






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






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






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






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






17. Square root of variance/initial investment






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






19. Fees or expenses - tax consequences






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






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






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






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






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






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






26. Culture/philosophy - money - risk/reward - career trajectory - other support roles






27. 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






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






29. 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






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






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






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






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






34. Probability X squared deviation of payoff from expected value






35. 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






36. 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






37. Unique risks






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






39. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






40. 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






41. 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






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






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






44. Amount of money you have paid into the house






45. 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






46. 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






47. Economy wide risks - consumer spending - economy






48. Fees or expenses - tax consequences






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






50. Square root of variance/initial investment