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. 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






2. Bonds: coupon income + changes in price due to changes in interest rates - stocks: dividend yield + growth in earnings + change in p/e






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






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






5. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






6. 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






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






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






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






10. 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






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






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






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






14. Amount of money you have paid into the house






15. Bonds: coupon income + changes in price due to changes in interest rates - stocks: dividend yield + growth in earnings + change in p/e






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






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






19. 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






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






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






22. 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






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






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






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






26. 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






27. 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






28. 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






29. Payoff-expected value






30. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






31. Asset allocation and diversification






32. 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






33. Paid per transaction for your idea






34. 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






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






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






37. 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






38. Reduce risk and can increase returns






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






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






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. Buy low and sell high






43. Investment banks - financial consultants






44. Economy wide risks - consumer spending - economy






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






47. 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






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






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






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