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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. 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






2. 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






3. Reduce risk and can increase returns






4. Asset allocation and diversification






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






6. Restricted and unrestricted funds - characteristics and constraints






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






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






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






10. Selling loses so you avoid capital gain taxes






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






12. Get paid on hourly basis for advice






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






14. Brokerages - insurance companies






15. 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






16. 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






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






18. Brokerages - insurance companies






19. Square root of variance/initial investment






20. 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






21. 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






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






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






24. 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)






25. 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






26. 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






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






28. Probability X squared deviation of payoff from expected value






29. 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






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






31. Paid per transaction for your idea






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






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






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






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






36. Inherited wealth - suddenly wealthy - endowments and foundations






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






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






39. 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






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






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






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






43. 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






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






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






46. Measure of uncertainty about the future payoff to an investment measured over some time horizon and relative to a benchmark






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

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48. Economy wide risks - consumer spending - economy






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






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