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






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






3. 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






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






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






6. 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






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






8. 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






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






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






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






12. Brokerages - investment banks - commercial banks - trust departments - large comprehensive accounting firms - independent financial planners - insurance companies






13. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






14. Get paid on hourly basis for advice






15. Brokerages - insurance companies






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






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






18. Probability X squared deviation of payoff from expected value






19. Reduce risk and can increase returns






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






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






22. Amount of money you have paid into the house






23. 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






24. Weighted average of the expected returns of its components






25. 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)






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






29. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






30. 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






31. Square root of variance/initial investment






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






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

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






35. 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






36. Inherited wealth - suddenly wealthy - endowments and foundations






37. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






38. 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?






39. 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






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






41. 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






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






43. Reduce risk and can increase returns






44. 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






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






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






47. 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






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






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






50. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete