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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. Risk by keeping investor with pre-determined risk profile






2. 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






3. Client is unwilling to make appropriate trades due to tax impact or sentimental attachment - wealth management is unable to determine correlations between stocks - trading them through time (actively managing account)






4. 0 company could fail






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






6. 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






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






9. 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






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






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






12. 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






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






14. 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






15. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






16. Client is unwilling to make appropriate trades due to tax impact or sentimental attachment - wealth management is unable to determine correlations between stocks - trading them through time (actively managing account)






17. Probability theory






18. Probability X squared deviation of payoff from expected value






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






20. 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






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. Restricted and unrestricted funds - characteristics and constraints






23. Unique risks






24. Square root of variance/initial investment






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






26. Inherited wealth - suddenly wealthy - endowments and foundations






27. 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






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






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






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






31. Selling loses so you avoid capital gain taxes






32. 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






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






34. 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






35. Brokerages - insurance companies






36. 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






37. 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






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






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






40. Investment banks - financial consultants






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






42. 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






43. 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






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






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






46. 0 company could fail






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






48. Reduce risk and can increase returns






49. 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






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