Test your basic knowledge |

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






2. 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






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






4. Brokerages - insurance companies






5. 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






6. 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






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






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






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






10. Inherited wealth - suddenly wealthy - endowments and foundations






11. 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






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






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






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






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


16. Reduce risk and can increase returns






17. Across and within asset classes - internationally as well as domestically - find investments with low correlation R2 - asset correlation changes over time - for stocks diversify across and within sectors - diversify over time with dollar cost averagi






18. Don't want stocks highly correlated if trying to diversify






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






20. 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?






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






22. 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






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






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






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






26. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






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






28. 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






29. Get paid on hourly basis for advice






30. 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






31. 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






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






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






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






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






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






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






38. 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






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






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






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






42. 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






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






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. Economy wide risks - consumer spending - economy






46. 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






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






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






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






50. Payoff-expected value