W1

Question 1

What are some of the client personal attitudes?

Answer 1

Risk profile, Expectations regarding time frames, Expected returns, Degree of involvement, Liquidity needs, Personal preferences

Question 2

What is the approach the planner should take in terms of risk and return?

Answer 2

Recommend the highest return choice for a determined risk guidelines, or recommend the minimum risk for an expected return

Question 3

What are the three major needs before giving suitable recommendations?

Answer 3

Determine risk tolerance (Assessment questionnaire and personal info, and do periodical adjustments), Asset Allocation (Asset classes, Industries and Sectors) and Investment Choices (Execute buys)

Question 4

Some factors that impact investment plans are:

Answer 4

Personal goals, Family circumstances, Tax rates, Liquidity needs, Business interests, Tax attributes of the individual…

Question 5

Some investment suitability factors (KYC & KYP) are:

Answer 5

Personal situation, Economic cycle, Costs of investing, Historical performance, Performance expectations, Risk tolerance.

Question 6

The 5 main areas of investment objectives are:

Answer 6

Preservation of nominal capital, Preservation of purchasing power, Liquidity of capital, Income stream and Growth of capital

Question 7

Another name for Preservation of nominal capital is:

Answer 7

Safety of principal

Question 8

Preservation of nominal capital refers to:

Answer 8

Ensuring the dollar value of their invested principal does not decline, Nominal capital represents the dollar value that is invested, before taxes, fees and other investment-related expenses.

Question 9

One cost investors face when their focus is Preservation of nominal capital is:

Answer 9

Inflation

Question 10

Preservation of purchasing power refers to:

Answer 10

Protecting the real dollar value, not simply the nominal dollar value, of their investments.

Question 11

Some tools to combat inflation risk are:

Answer 11

Equities (although it comes with market risk), Precious metals such as gold, Real estate.

Question 12

About the risk profile for purpose of Liquidity of capital is true to say:

Answer 12

Don’t consider investments where there is a risk of substantial loss should the investor need to cash out in a relatively short time.

Question 13

What is the main issue with marketability?

Answer 13

Having a wide variance in the bid-ask spread when the investor is forced to liquidate a security unexpectedly.

Question 14

Two aspects to consider if the objective is a Income stream are:

Answer 14

Inflation risk and tax effect of income (dividends vs interest) or withdrawals made from registered plans.

Question 15

Which is the most common investor profile when the objective is growth of capital?

Answer 15

Those in prime earning years saving for retirement, willing to accept greater risk.

Question 16

Some investment constrains are:

Answer 16

Legal and regulatory issues (Insider info/director/auditor), Liquidity, Time horizon, Unique circumstances(ex. client holds RSUs, or sentimentally attached to a security that’s not suitable given their objectives)

Question 17

The three main factors of risk tolerance are:

Answer 17

Willingness to accept risk, Ability to accept risk, Requirement to accept risk

Question 18

What does willingness to accept risk refers to?

Answer 18

Personal attitudes toward fluctuations in investment value. (To be reviewed periodically)

Question 19

What does ability to accept risk refers to?

Answer 19

Refers to a client’s financial capacity to sustain fluctuations in investment value. (Job, Net worth, Time horizon)

Question 20

What does requirement to accept risk refers to?

Answer 20

Refers to a client’s need to accept a minimum amount of risk to earn the expected return for achievement of a goal. (Investor needs a certain future value, they might need to achieve a return that requires them to accept some risk.)

Question 21

What are some factors that affect risk?

Answer 21

Inv. objectives, Personal attitudes, Time horizon, Tolerance for downside volatility (Affected by: Knowledge, Investment experience, Income, Net worth…)