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






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






3. 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






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






5. Review at least annually to manage gains/losses - clients adding or taking distributions require more frequent monitoring






6. 0 company could fail






7. Reduce risk and can increase returns






8. Precise and regular review of each investment section - risk management/ volatility check - arbitration proposals - continuous control






9. 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






10. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






11. Asset allocation and diversification






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






13. Amount of money you have paid into the house






14. Weighted average of the expected returns of its components






15. Payoff-expected value






16. 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






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






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






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






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






21. In a fee based environment - base salary typically has a sig. variable component in the form of commissions or bonuses - variable compensation determined by quantitative and qualitative factors - similar to fee arrangement for client






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






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






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






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






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






27. 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






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






29. Asset allocation and diversification






30. Paid per transaction for your idea






31. 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






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






33. Investment banks - financial consultants






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






35. Inherited wealth - suddenly wealthy - endowments and foundations






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






37. 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






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


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






40. Probability theory






41. 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?






42. 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






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






44. Weighted average of the expected returns of its components






45. 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






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






47. 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)






48. Square root of variance/initial investment






49. 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






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