AWMA Exam 1 Questions And Answers
Graded A+.
Which one of the following characteristics is more correct concerning younger wealthy
individuals (millennials and GenXers)?
A) Younger wealthy individuals are seeking more technological options in financial
planning.
B) Younger wealthy individuals have not experienced significant bear markets.
C) Younger wealthy individuals have directly opposite financial needs as compared to
baby boomers.
D) Younger wealthy individuals likely want to be advised by one of their own generation.
- correct answer. A) Younger wealthy investors (millennials and GenXers) are seeking
fresh approaches to financial planning, including more technological options. In addition,
young clients also have been through fewer years of investing but have experienced
several significant bear markets. Mod 1
One of the most important life goals of wealthy individuals is
A) protecting wealth.
B) assuring their retirement lifestyle.
C) minimizing taxes.
D) travelling the world. - correct answer. D) The most frequently stated life goals for
wealthy individuals are having good health, travelling the world, and achieving financial
success. To achieve financial success, the most common financial goals are protecting
wealth, assuring retirement lifestyle, minimizing taxes, and leaving an estate to their
heirs. Mod 1
One of the most important financial goals of wealthy individuals is
A)leaving an estate to their heirs.
B)having good health.
C)none of these.
D)travelling the world. - correct answer. A) To achieve financial success, the most
common financial goals are protecting wealth, assuring retirement lifestyle, minimizing
taxes, and leaving an estate to their heirs. The most frequently stated life goals for
,wealthy individuals are having good health, travelling the world, and achieving financial
success. Mod 1
Which one of the following statements is true regarding sustainable and responsible
investments (SRIs)?
A) Shareholder activism is a part of SRIs.
B) Baby boomers are the most likely demographic to invest in SRIs.
C) SRIs provide lower returns, but are a "feel-good" option for investors.
D) SRIs provide only a negative filter of staying away from certain assets. - correct
answer. A) Shareholder activism also plays a part in getting companies to listen by
passing shareholder resolutions. Sustainable and responsible investing has been found
to be of importance to Gen Xers and millennials. Several studies have now shown
taking into account ESG factors actually increases long-term returns. For SRI
investments, the adviser needs to set up a series of filters to determine a client's
specific wants for a sustainable fund. For instance, tobacco may be a main prohibition
for one client, while religious aspects may be a positive filter for that same or another
client. Mod 1
Concerning control of assets in a private foundation versus a donor-advised fund, which
one of the following aspects is true for a donor-advised fund?
A)Remains with founder's values
B) Needs lengthy IRS approval
C) Easier and less expensive to launch
D) Must pay out a certain percentage each year - correct answer. C) Donor-advised
funds (DAFs) are growing in popularity and have the advantage of being easier and
cheaper to launch and not requiring the lengthy IRS approval that private foundations
need. Values may change with a DAF, as major contributors have input into this type of
charitable fund. In addition, only private foundations must make payouts each year;
DAFs have flexibility with this. Mod 1
If a high net worth (HNW) business owner came to your office, what would you expect
her financials to show, as compared to a HNW non-business owner?
A) About the same income, with more assets and higher net worth
B) About the same income with more assets, yet lower net worth
C) Higher income, with fewer assets and lower net worth
D) Lower income, with fewer assets and lower net worth - correct answer. A) Income
is similar between all HNW professions; however, assets and net worth include
business assets, so more assets and higher net worth are common for HNW business
owners. Many business owners are exposed to a large amount of unsystematic risk
because a significant amount of their capital is often tied up in their business. Mod 1
When considering the social impact goals of a high net worth client, wealth planners
should expect those clients to
, A)not want their planner to be involved in the charitable concern.
B)want their children to also develop charitable tendencies.
C) only want the charitable concern in order to reduce tax exposure.
D) overwhelmingly donate assets and not volunteer their time. - correct answer. B)
The reasons high net worth individuals make charitable donations are largely
humanitarian in nature—only half of these individuals donate to reduce tax exposure as
a secondary concern. It is important for advisers to be aware of and research any social
impact their clients find important. In addition, the preferred methods of accomplishing
social impact in the U.S., as compared to worldwide, are more religious and also include
more aspects that are nonfinancial, such as volunteerism. Mod 1
As compared to younger high net worth individuals, older wealthy individuals describe
their financial needs as more geared toward
A)managing cash and credit.
B) digital meetings.
C)investing outside of equities.
D) obtaining and using credit. - correct answer. A) Older clients describe their needs
as straightforward: managing cash and credit, and growing investments. Younger
clients indicate more complex needs, such as a reluctance to invest in equities, interest
in digital meetings, and a propensity toward using credit. Mod 1
Which one of the following top overall concerns was the same for those wealthy clients
under 30 and above 60?
A)Understanding of risk tolerance
B)Fee transparency
C)Strong investment performance
D)Ensuring children's well-being - correct answer. C) The top wealth concerns of
wealthy clients under 30 and above 60 differ greatly, but one area of agreement is
wanting strong investment performance. Under-30 clients generally want efficiency and
transparency—they want to understand what is being proposed and the costs and risks
involved. They also will not hesitate to go to other individuals or sources in order to
better understand their options. This is not the case with a typical over-60 client, who
will work with just one adviser whom they trust, and will want that adviser to have a
strong understanding of their needs and risk tolerance. In addition, younger investors
are more concerned with child care and older investors with obtaining advice about risk
tolerance. Mod 1
The top reasons for a wealthy client to leave an adviser have been found to be in the
general category of
A)poor firm notoriety.
B)high fees.
C)poor investment advice.
