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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. Sum of probabilities - probability weighted sum of the possible outcomes






2. 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






3. Get paid on hourly basis for advice






4. 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






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






6. 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






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






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






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






10. 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






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






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






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






14. 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






15. 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?






16. 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






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






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






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






20. Inherited wealth - suddenly wealthy - endowments and foundations






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






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






23. Increases risk and reduces sharpe (return/risk) ratios






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






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






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






27. Square root of variance/initial investment






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






29. 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






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






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






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






33. Probability theory






34. Weighted average of the expected returns of its components






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






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






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






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






39. Investment banks - financial consultants






40. Probability theory






41. 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)






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






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






44. 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






45. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






46. 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






47. Economy wide risks - consumer spending - economy






48. 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






49. 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






50. Fees or expenses - tax consequences