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






2. 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






3. Selling loses so you avoid capital gain taxes






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






5. Unique risks






6. Payoff-expected value






7. Reduce risk and can increase returns






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






9. Selling loses so you avoid capital gain taxes






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






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






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






13. 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)






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






15. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






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






17. 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






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






19. Asset allocation and diversification






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






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






22. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






23. 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






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






25. 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






26. Investment banks - financial consultants






27. Probability X squared deviation of payoff from expected value






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






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






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






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






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






33. 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






34. Execution at 18 mo intervals provides most of the benefits with less costs






35. 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






36. 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






37. 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






38. 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






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






40. Monitoring performance and adherence to policy - reviewing IPS on regular basis






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






42. Square root of variance/initial investment






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






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






45. Fees or expenses - tax consequences






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






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






48. 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?






49. 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






50. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning