AWMA Exam 1 UPDATED ACTUAL
Questions and CORRECT Answers
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.
D) poor communication. - CORRECT ANSWER - D) The top reasons a wealthy client
would leave an adviser, with the most egregious reason being first, are: not returning phone calls
in a timely manner, not being proactive with contact, not providing good ideas and advice, and
not returning emails in a timely manner. Mod 1
George's bonds fell in price on news of higher interest rates. To which one of the following risks
are George's bonds most likely to be subject?
Questions and CORRECT Answers
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.
D) poor communication. - CORRECT ANSWER - D) The top reasons a wealthy client
would leave an adviser, with the most egregious reason being first, are: not returning phone calls
in a timely manner, not being proactive with contact, not providing good ideas and advice, and
not returning emails in a timely manner. Mod 1
George's bonds fell in price on news of higher interest rates. To which one of the following risks
are George's bonds most likely to be subject?
