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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. Unique risks






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






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






4. 0 company could fail






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






6. 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






7. 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






8. 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?






9. Probability X squared deviation of payoff from expected value






10. 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






11. Selling loses so you avoid capital gain taxes






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






13. 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






14. Asset allocation and diversification






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

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

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17. 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






18. 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






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






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






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






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






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






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






26. Fees or expenses - tax consequences






27. Unique risks






28. Payoff-expected value






29. 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)






30. 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






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






32. 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






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






34. Brokerages - insurance companies






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






36. Payoff-expected value






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






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






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






40. Investment banks - financial consultants






41. Buy low and sell high






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






43. 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






44. 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






45. 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






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






47. Paid per transaction for your idea






48. 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






49. Reduce risk and can increase returns






50. Selling loses so you avoid capital gain taxes