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AWMA EXAM 3 QUESTIONS WITH CORRECT ANSWERS
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AWMA EXAM 3 QUESTIONS WITH CORRECT ANSWERS2024-2025
The top three specialist areas in which high net worth individuals seek guidance
include all of the following except...
A) Retirement planning.
B) Tax planning.
C) Estate planning.
D) Investment planning. - ANSWER A) High net worth individuals seek assistance
on tax, estate, and investment planning. Retirement planning is not as important,
but it can be a minor issue. Mod 1
In terms of behavioural biases, relative to the bulk of wealthy, high-net-worth
individuals have
A) increased money-avoidance thoughts.
B) Less loss aversion.
C)fewer money-related beliefs.
D) Increased external locus of control. - ANSWER B) The wealthy are more likely
than other investors to have a favourable attitude toward money. When compared
to the mass affluent (who have more money biases and are earning less as a result),
high-net-worth individuals have fewer money-avoidance beliefs, more
money-status beliefs, a greater internal locus of control, a lower tendency for loss
aversion, and significantly more attribution of their financial success to two factors:
a desire to increase their wealth and a commitment to pursue their passions. Mod 1
The liquid asset allocation in the wealth allocation framework is most likely to
contain which of the assets listed below?
,A) Dividend stocks.
B) Preferred stocks.
C. Managed global bonds.
D)Annuities - ANSWER D) This section of the portfolio includes insurance
products such as house mortgages, annuities, hedging, direct gold, and cash and
cash equivalents. Mod 1
In the wealth allocation framework, the hazardous asset allocation will most likely
contain
A) Investment real estate.
B)hedges.
C) Large-cap ETFs.
D)Well-balanced mutual funds. - ANSWER A) Risky assets can take many forms,
including investment real estate, a small business, concentrated stocks and stock
options, global small company stocks, some commodities, aggressive inflation
hedges, and out-of-the-money calls/puts on currencies or bonds. Mod 1
In the wealth allocation framework, the core diversified asset allocation would
probably contain
A)annuities.
B)hedges.
C) managed global bonds.
D) home mortgage - ANSWER C) The main diversified asset category, which
makes up the majority of the portfolio, is still relatively low risk; it can include
managed income investments such as dividend stocks, preferred stocks, own
business stock (unless risky), and managed global bonds. Mod 1
,In terms of wealth allocation, which of the following portfolio models is the best fit
for a risk-averse high-net-worth investor?
A) 20% liquid assets, 75% diversified assets, and 5% risky assets.
B) 30% liquid assets, 50% diversified assets, and 20% risky assets.
C) 25% liquid assets, 60% diversified assets, and 15% risky assets.
D)45% liquid assets/50% major diversified assets/5% risky assets - ANSWER D)
According to the wealth allocation framework, risky investments for a risk-averse
high-net-worth investor should account for only 5% to 10% of their portfolio. A
minimum of 20% liquid assets is suggested for portfolio allocations across all risk
levels. The core portfolio should represent only 40%-70% of overall assets. Mod 1
In the wealth allocation paradigm, human capital belongs to which of the following
portfolio "buckets"?
A) Hedging assets.
B) Mainly diversified assets
C) Liquid assets.
D) Risky assets - ANSWER C) In the wealth allocation paradigm, human capital is
included in the liquid assets "bucket." Mod 1
In the wealth allocation paradigm, human capital is best defined as the
high-net-worth individual's ability to leverage
A) Their children.
B)their own abilities, talents, connections, and/or reputation.
C) an older business purchasing a new business.
, D) Their employees. - ANSWER B) Human capital is important for high net worth
clients since their education, skills, abilities, and/or connections serve as a safety
net for assets. Mod 1
Which of the following claims about the goals-based approach to financial planning
is correct?
A) Stricter fiduciary norms would have an undesirable effect on goal-based
financial planning.
B)Taking on more risk is required in goal-based financial planning.
C)Goals-based financial planning is not suggested for customers of all income
levels; it is most effective for high net worth clients.
D)To facilitate goal-based financial planning, an adviser must establish trust with a
client. - ANSWER D) To facilitate goals-based financial planning, an adviser must
first establish trust with a client in order to learn about the client's goals and
aspirations. Often, less risk is required because the emphasis is not on beating the
market return, but on taking only the risk necessary to achieve the goal. This
strategy works successfully with clients of all income levels. Mod 1
Which of the following would be the most appropriate long-term goal for a
high-net worth client?
A) Paying for a luxurious holiday.
B) Upgrading their home
C) Creating an emergency fund.
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