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






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






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






4. Weighted average of the expected returns of its components






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






6. Risk by keeping investor with pre-determined risk profile






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






8. 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






9. Payoff-expected value






10. 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)






11. Reduce risk and can increase returns






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






13. Selling loses so you avoid capital gain taxes






14. 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






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






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






17. Probability theory






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






19. 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






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






21. Brokerages - insurance companies






22. 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






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






24. Brokerages - insurance companies






25. Paid per transaction for your idea






26. Representation in domestic and international - large - mid - small cap - no individual stock more than 5% of total portfolio






27. 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






28. 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






29. 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






30. Economy wide risks - consumer spending - economy






31. Payoff-expected value






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






33. 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






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






35. 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






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






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






38. Buy low and sell high






39. Probability X squared deviation of payoff from expected value






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






41. 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






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






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






44. 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






45. 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?






46. 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






47. Restricted and unrestricted funds - characteristics and constraints






48. Fees or expenses - tax consequences






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. 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