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CFA L3 > PWM > Flashcards

PWM Flashcards

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CFA flashcards
1
Q

Joint life annuity

A

Under a joint life annuity, two or more individuals, such as a husband and a wife, receive payments until all beneficiaries die.

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2
Q

Ethical considerations in pwm

A

Independence and objectivity
Loyalty, prudence and care
Suitability
Diligence and reasonable basis

Confidentiality
Conflict of interest

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3
Q

Discuss traditional approach and it’s steps

A

The traditional approach to constructing a private clients portfolio views risk in the overall portfolio context

  • Identify appropriate asset classes for the client’s portfolio
  • Develop capital market expectations
  • Determine asset class weights for the portfolio consistent with the client’s risk tolerance for the overall portfolio
  • Assess investment constraints that may limit wealth manager’s choice of investments
  • implement the portfolio
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4
Q

Parts of an IPS for private wealth clients

A
  • Client background and investment objectives
  • key investment parameters
  • portfolio asset allocation
  • portfolio management and implementation
  • duties and responsibilities of the private wealth manager
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5
Q

Mortality table

A

Shows life expectancy for an individual at different ages

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6
Q

Life annuity

A

Used to reduce longevity risk

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7
Q

Consumption gaps

A

Old people don’t spend as much as we expected them to. Maybe because of uncertainty of future income

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8
Q

Annuity puzzle

A

Old people tend to avoid buying annuities to meet spending needs in retirement

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9
Q

Lack of self control

A

Retirees prefer to meet their spending needs from their investment income rather than liquidating securities

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10
Q

Deterministic forecasting

A

A traditional linear return analysis assumes that a private client’s portfolio will achieve a single compound annual growth rate across the client’s investment horizon

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11
Q

Technical skills

A
  • proficiency in financial planning
  • capital markets and asset classes
  • portfolio construction and monitoring
  • technology skills
  • fluency in multiple languages
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12
Q

Soft skills

A
  • Communication and social skills
  • education skills
  • business development and sales skills
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13
Q

Personal information manager should ask client

A

Family circumstances
Proof of identification
Employment information
Retirement plans
Sources of wealth specific return or investment objectives
Risk tolerance
Investment preferences

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14
Q

Loss prevention

A

Reducing probability of the risk

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15
Q

Loss reduction

A

Involves taking actions to reduce the amount of the loss

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16
Q

Risk transfer

A

Buying insurance

17
Q

Risk retention

A

Self insurance

18
Q

Risk avoidance

A

Eg - don’t own expensive cars that are costly to repair

19
Q

Occurs regularly and very severe

A

Risk avoidance

20
Q

Occurs regularly and not severe

A

Risk reduction

21
Q

Infrequent and severe

A

Risk transfer

22
Q

Infrequent and not severe

A

Risk retention

23
Q

Types of risk to an individual

A
  • earnings risk (insure with disability insurance)
  • premature death risk (with life insurance)
  • longevity risk (with annuities)
  • property risk (property insurance)
  • liability risk (liability insurance)
  • health risk (health insurance)
24
Q

revocable trust

A

Settlor can rescind/revoke the trust and resume ownership of the assets. the creditors too can claim from the assets of the trust

25
Q

irrevocable trust

A

Settlor relinquishes ownership. settlor apna paisa wapas nahi le sakta hai

26
Q

Fixed trust

A

the pattern of distribution to the beneficiaries is predetermined by the settlor and incorporated in the trust documents

27
Q

Discretionary trust

A

the trustee decides how the assets are to be distributed

28
Q

controlled foreign corporation

A

set up in a country outside of the investors home country for which the investor may hold assets

29
Q

strategies for managing concentrated positions in public companies

A
  • completion portfolio (invest in other non related investments)
  • equity monetization, collars and call writing
  • tax free exchanges (form a group with 10 other investors…)
  • Charitable remainder trust
30
Q

strategies for private owned business

A
  • personal line of credit secured by company shares
  • Leveraged recapitalization
  • Esop
31
Q

For real estate

A
  • Mortgage financing
  • Charitable trust/donor-advised fund
32
Q

7 stages of an individual

A
  • education
  • early career
  • career developement
  • peak accumulation
  • pre retirement
  • initial retirement
  • later stage of retirement

CFA L3 (10 decks)

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