Preview Questions Wealth Manager | Role Specific Skill

Question 1: How should downside risk be managed for a client with a conservative risk profile?

Which action should you take?

Choose only one option

By investing primarily in high-risk equities and speculative stocks

By using options and derivatives to hedge against market downturns

By focusing exclusively on international stocks to reduce local risk

By focusing on low-volatility, income-producing assets such as bonds and cash equivalents

Question 2: How can a wealth manager mitigate the risks associated with individual stock concentration in a portfolio?

Which action should you take?

Choose only one option

Encourage the client to hold only a few highly concentrated stocks

Ignore diversification and focus on maximizing returns from individual stocks

Invest all funds into fixed-income instruments to reduce stock exposure

Diversify the portfolio by adding non-correlated assets and sectors

Question 3: How do you integrate Environmental, Social, and Governance (ESG) factors into an investment strategy?

Which action should you take?

Choose only one option

By selecting investments that align with the client's values and sustainability goals

By focusing only on environmental factors and ignoring social and governance issues

By excluding all high-growth sectors that are not ESG-compliant

By focusing only on financial performance without regard to ESG factors

Question 4: What is the purpose of rebalancing a portfolio, and when should it be done?

Which action should you take?

Choose only one option

To ensure all assets perform equally in terms of returns

To liquidate underperforming assets regardless of market conditions

To take advantage of short-term market trends and maximize returns

To realign the portfolio's asset allocation to its target mix, typically done annually or after significant market movements

Question 5: What is the impact of the "step-up in basis" provision on a client's estate planning?

Which action should you take?

Choose only one option

It allows beneficiaries to inherit assets at their current market value, reducing potential capital gains tax

It increases the amount of taxes owed by the estate upon transfer

It eliminates the estate tax entirely, regardless of asset value

It requires the client to pay a higher tax rate on inherited assets

Question 6: What is the importance of asset location in tax-efficient investment strategies?

Which action should you take?

Choose only one option

Asset location involves placing investments in tax-advantaged accounts to minimize taxes and maximize after-tax returns

Asset location only applies to high-net-worth clients and is irrelevant for others

Asset location refers to diversifying across global markets, which has no impact on taxes

Asset location is not important, as tax implications can be ignored if returns are high