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






2. 0 company could fail






3. Payoff-expected value






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






5. Paid per transaction for your idea






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






7. Amount of money you have paid into the house






8. Restricted and unrestricted funds - characteristics and constraints






9. Reduce risk and can increase returns






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






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






12. Get paid on hourly basis for advice






13. 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?






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






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






16. If stocks are chosen carefully to create lowest possible correlation of returns - if those stocks are monitored carefully to assure that they will continue to have uncorrelated returns






17. 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






18. Accumulate wealth over time by spending less than they earn - invest 20% of income per year - incomes are about average - advanced degrees






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






20. 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






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






22. Brokerages - insurance companies






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






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






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






26. 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






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






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






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






30. Asset allocation and diversification






31. Square root of variance/initial investment






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






33. 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






34. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






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






36. Inherited wealth - suddenly wealthy - endowments and foundations






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






38. 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






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






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






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






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






43. 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






44. 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






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






46. Priority of income - growth - safety of principal - benchmarks






47. Selling loses so you avoid capital gain taxes






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


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






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