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






2. 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)






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






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






5. 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






6. Probability X squared deviation of payoff from expected value






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






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






9. 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






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






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






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






13. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






14. 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






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






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






17. 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






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






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






20. 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






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






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






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






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






25. Buy low and sell high






26. Get paid on hourly basis for advice






27. 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






28. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






29. 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






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






31. 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






32. 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






33. Selling loses so you avoid capital gain taxes






34. Payoff X probability - payoff is the potential return of the investment






35. 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






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






37. 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






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






39. Amount of money you have paid into the house






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






41. 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






42. Selling loses so you avoid capital gain taxes






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






44. Paid per transaction for your idea






45. 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






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






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






48. Amount of money you have paid into the house






49. Payoff X probability - payoff is the potential return of the investment






50. Get paid on hourly basis for advice