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Test your basic knowledge |
Wealth Management Exam
Start Test
Study First
Subjects
:
personal-finance
,
business-skills
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. The theoretical rate of return of an investment with no risk of financial loss - i.e. short dated domestic govt bond (default benchmark)
what return includes for mutual funds
investment objectives
risk-free investment
needs step of wealth management
2. Who wants ongoing service over financial affairs; should align interests insofar as the wealth management professional wants to see the portfolio grow as much as the client
drivers of return
best client suited for fee based
what diversification can do
validation step of wealth management
3. Selling loses so you avoid capital gain taxes
tax loss harvesting
drivers of return
what makes a good benchmark
how to protect client from unjustified risks?
4. Broker/dealer- FINRA - SEC - bank exemption- fed and state regulators - employers - industry associations
deviation of payoff from expected value
what does rebalancing force?
who governs these services
sources of taxable return
5. Unique risks
VaR of stocks and bonds
Value at Risk (VaR)
idiosyncratic risk
timing of rebalancing
6. Payoff-expected value
drivers of return
Value at Risk (VaR)
deviation of payoff from expected value
investment objectives
7. Reduce risk and can increase returns
monitor step of wealth management
what diversification can do
how to choose where to work
morningstar study about rebalancing
8. High ethical standards - communication skills - quantitative and analytical skills - attention to detail - work independently - current events - financial matters - client interests
develop investment sections step of wealth management
hourly
who is suited for wealth management career
why correlation matters
9. Selling loses so you avoid capital gain taxes
tax loss harvesting
how to computer std. dev
VaR of bank's mortgage backed securities
what return includes for mutual funds
10. Culture/philosophy - money - risk/reward - career trajectory - other support roles
uniform prudent investor act
risk-free investment
how to choose where to work
fee
11. Appropriate credit quality and interest rate risk - no individual corporate issuer more than 5%
diversifying bonds
who else will you serve?
certified financial planner
setting allocation policy based on targets and ranges
12. Broker/dealer- FINRA - SEC - bank exemption- fed and state regulators - employers - industry associations
who governs these services
monitor step of wealth management
what makes a good benchmark
How many issues needed to create a diversified stock portfolio?
13. 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)
tax loss harvesting
commission
how 15-20 stockswill not diversify portfolio
diversifying stocks
14. Take account of the bank's strategy - product - recommendations - ideas and investment themes - apply allocation rules - investment proposal
develop investment sections step of wealth management
morningstar study about rebalancing
how to choose where to work
hourly
15. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete
who use salary based model
use commissions model
how to compute variance
chartered financial analyst
16. Used to minimize issuer specific risks - principle of holding more than one risk at a time
what return includes for mutual funds
salary
risk-free investment
diversification
17. Purpose of the funds to be invested - investment objectives - responsibilities of the investment manager - responsibilities of the client - set allocation policy based on targets or ranges
timing of rebalancing
how to computer std. dev
investment policy statement
responsibilities of the client
18. Payoff X probability - payoff is the potential return of the investment
how to choose where to work
probability theory
who is best suited for hourly wealth management
two rates that returns are taxed by
19. Asset allocation and diversification
diversifying stocks
who use hourly
how to protect client from unjustified risks?
what would happen if you were out of the stock market during the 90 best days
20. You would have missed 96% of market's gains
what would happen if you were out of the stock market during the 90 best days
use commissions model
responsibilities of the client
what return includes for mutual funds
21. Payoff X probability - payoff is the potential return of the investment
investment policy statement
tax loss harvesting
probability theory
diversifying stocks
22. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning
fee
certified financial planner
idiosyncratic risk
measuring risk
23. Who wants ongoing service over financial affairs; should align interests insofar as the wealth management professional wants to see the portfolio grow as much as the client
use fee based model
investment policy statement
how 15-20 stocks create diversified portfolio
best client suited for fee based
24. Determines broad portfolio composition across asset classes - allocation between stock - bond - and cash determined more than 90% of the variability of returns
offer wealth management services
How many issues needed to create a diversified stock portfolio?
morningstar study about rebalancing
asset allocation
25. 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
how 15-20 stocks create diversified portfolio
hedging risk
working at brokerage
dollar cost averaging
26. Investment banks - financial consultants
who use hourly
systematic risk
who governs these services
best client suited for fee based
27. Probability X squared deviation of payoff from expected value
use fee based model
how to compute variance
investment objectives
dollar cost averaging
28. Increases risk and reduces sharpe (return/risk) ratios
Value at Risk (VaR)
measuring risk
what happens if you never rebalance
how to diversify
29. Commission - fee - salary - hourly fee for service
how 15-20 stocks create diversified portfolio
qualified dividends
VaR of stocks and bonds
4 ways of getting paid
30. Sell assets with losses and offset with sales of those with gains - rebalance in tax advantaged accounts (IRA or 401K)
how time impacts risk
what return includes for mutual funds
wealth management recommendation about rebalancing
how to rebalance for no tax cost?
31. Brokerages - investment banks - commercial banks - trust departments - large comprehensive accounting firms - independent financial planners - insurance companies
asset allocation
offer wealth management services
what makes a good benchmark
tax loss harvesting
32. Increases risk and reduces sharpe (return/risk) ratios
fee
offer wealth management services
what happens if you never rebalance
sources of taxable return
33. 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
4 ways of getting paid
qualified dividends
VaR of adjustable rate mortgage?
how 15-20 stocks create diversified portfolio
34. Execution at 18 mo intervals provides most of the benefits with less costs
VaR of adjustable rate mortgage?
expected value of probability theory
morningstar study about rebalancing
expected value of probability theory
35. 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
rebalancing
Value at Risk (VaR)
market timing
uniform prudent investor act
36. 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
idiosyncratic risk
market timing
what does rebalancing control?
working at community bank
37. 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
dollar cost averaging
how time impacts risk
how 15-20 stocks create diversified portfolio
VaR of bank's mortgage backed securities
38. Who wants objective advice - does not need ongoing attention - or who just wants a second opinion on what they are doing with no strings attached
iowa trust code requires the trustee to consider
what to ask if client has inappropriate allocation
who is best suited for hourly wealth management
best client suited for fee based
39. Determines broad portfolio composition across asset classes - allocation between stock - bond - and cash determined more than 90% of the variability of returns
idiosyncratic risk
asset allocation
needs step of wealth management
how to compute variance
40. Monitoring performance and adherence to policy - reviewing IPS on regular basis
responsibilities of the client
where do wealthy clients get their money?
best client suited for commission based
market timing
41. 1. define your needs and objectives 2. develop investment sections 3. regularly monitor your portfolio 4. validation
steps of wealth management
working at brokerage
how 15-20 stocks create diversified portfolio
probability theory
42. Square root of variance/initial investment
needs step of wealth management
diversification
calculating expected return
how to computer std. dev
43. Risk by keeping investor with pre-determined risk profile
rebalancing recommendations
what to ask if client has inappropriate allocation
what does rebalancing control?
VaR of stocks and bonds
44. Bonds: coupon income + changes in price due to changes in interest rates - stocks: dividend yield + growth in earnings + change in p/e
spreading risk
drivers of return
what diversification can do
asset allocation
45. Fees or expenses - tax consequences
where do wealthy clients get their money?
reasons to retain certain assets
salary
How many issues needed to create a diversified stock portfolio?
46. Sell assets with losses and offset with sales of those with gains - rebalance in tax advantaged accounts (IRA or 401K)
how to rebalance for no tax cost?
validation step of wealth management
what to ask if client has inappropriate allocation
What risk measurement is based on
47. Check compliance with concentration rules and diversification in the portfolio - validate the proposal or develop a new asset allocation - revision
how to diversify
validation step of wealth management
VaR of bank's mortgage backed securities
idiosyncratic risk
48. 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?
wealth management positions
working at brokerage
what to ask if client has inappropriate allocation
investment policy statement
49. 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
dollar cost averaging
iowa trust code requires the trustee to consider
VaR of adjustable rate mortgage?
wealth management positions
50. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning
hourly
two rates that returns are taxed by
risk-free investment
certified financial planner