AIF® ACCREDITED INVESTMENT FIDUCIARY | COMPLETE EXAM
QUESTIONS AND VERIFIED ANSWERS LATEST VERSION | TOP RATED
AIF Accredited Investment Fiduciary
Q1. Which of the following best defines a fiduciary under ERISA? A. Any
person who provides investment advice for a fee B. Any person who exercises
discretionary authority or control over plan assets C. Any person who sells
investment products to a plan D. Any person who attends plan committee
meetings ANSWER : B — Under ERISA Section 3(21), a fiduciary is anyone who
exercises discretionary authority or control over plan management or plan
assets.
Q2. The "Duty of Loyalty" requires a fiduciary to: A. Maximize returns
regardless of risk B. Act solely in the interest of plan participants and
beneficiaries C. Follow the advice of investment consultants D. Minimize fees
at all costs ANSWER : B — The Duty of Loyalty (prudent investor rule) requires
acting solely in the interest of beneficiaries.
Q3. Under ERISA, which of the following is NOT a named fiduciary? A. Plan
Administrator B. Investment Manager C. Plan Sponsor's CFO who attends
quarterly meetings but has no authority D. Trustee ANSWER : C — Fiduciary
status is determined by function, not title. Mere attendance without authority
does not confer fiduciary status.
Q4. A plan sponsor hires an investment advisor who has discretionary
authority over plan assets. This advisor is considered a: A. 3(16) fiduciary B.
3(21) fiduciary C. 3(38) fiduciary D. 4(21) fiduciary ANSWER : C — A 3(38)
,investment manager has discretionary authority and takes on fiduciary liability
for investment selection.
Q5. Co-fiduciary liability means that: A. Each fiduciary is only responsible for
their own decisions B. Fiduciaries may be liable for the breach of another
fiduciary if they knowingly participate or fail to take remedial action C. Liability
is always shared equally among all fiduciaries D. Only the plan sponsor has
liability ANSWER : B — Under ERISA Section 405, co-fiduciaries can be liable
for another's breach if they knowingly participate or fail to remedy it.
Q6. The "Prudent Expert" standard under ERISA requires fiduciaries to: A. Act
with the care, skill, prudence, and diligence of a prudent person familiar with
such matters B. Never lose money C. Always beat the market benchmark D.
Only invest in government securities ANSWER : A — The prudent expert
standard requires expertise appropriate to the role.
Q7. Which document should clearly define fiduciary roles and
responsibilities? A. Investment Policy Statement only B. Service agreements
and committee charters C. Marketing brochures D. Trade confirmations
ANSWER : B — Fiduciary roles must be documented in service agreements,
committee charters, and other governance documents.
Q8. A fiduciary who delegates investment management to a 3(38) manager:
A. Is completely relieved of all fiduciary responsibility B. Retains responsibility
for monitoring the 3(38) manager C. Must approve every individual trade D.
Cannot terminate the manager without DOL approval ANSWER : B —
Delegation does not eliminate fiduciary duty; the fiduciary must still monitor
the delegatee.
Q9. Under the Uniform Prudent Investor Act (UPIA), diversification is: A.
Optional if the fiduciary has expertise in a specific sector B. Required unless the
fiduciary reasonably determines that diversification is not prudent C. Only
required for plans over $100 million D. Prohibited for endowment funds
ANSWER : B — UPIA requires diversification unless special circumstances
justify concentration.
Q10. A plan committee member who is not a fiduciary can still be held liable
if they: A. Provide investment education to participants B. Exercise authority or
control they were not formally granted C. Attend meetings but abstain from
voting D. Hire a 3(38) investment manager ANSWER : B — Function
determines fiduciary status; exercising de facto authority creates liability.
,Domain 2: FORMALIZE — Investment Policy & Objectives
Key Concepts
• Investment Policy Statement (IPS) requirements
• Risk and return assumptions
• Asset allocation and diversification
• Benchmark selection
• Time horizon and liquidity needs
Practice Questions
Q11. An Investment Policy Statement (IPS) should include all of the following
EXCEPT: A. Investment objectives and constraints B. Specific stock
recommendations C. Rebalancing policy D. Duties and responsibilities of
parties ANSWER : B — An IPS sets policy and process, not specific security
recommendations.
Q12. The most appropriate benchmark for a diversified equity portfolio is: A.
The S&P 500 Index B. A blended benchmark reflecting the portfolio's strategic
asset allocation C. The 10-year Treasury yield D. The CPI inflation rate
ANSWER : B — Benchmarks should reflect the portfolio's actual asset
allocation, not just one asset class.
Q13. When determining a portfolio's risk tolerance, a fiduciary should
consider: A. Only the participant's stated risk preference B. The plan's time
horizon, liquidity needs, and liability structure C. The investment manager's
track record D. Current market conditions only ANSWER : B — Risk tolerance
must align with the plan's specific objectives and constraints.
Q14. The "efficient frontier" represents: A. The set of portfolios offering the
highest expected return for a given level of risk B. The boundary of acceptable
investments under ERISA C. The maximum loss a portfolio can experience D.
The average return of all asset classes ANSWER : A — Modern Portfolio
Theory defines the efficient frontier as optimal risk/return combinations.
Q15. Rebalancing a portfolio is important because it: A. Eliminates the need
for active management B. Maintains the strategic asset allocation and controls
risk drift C. Guarantees outperformance D. Reduces transaction costs ANSWER
, : B — Rebalancing keeps the portfolio aligned with its target allocation and risk
profile.
Q16. A fiduciary should review the IPS: A. Only when the investment manager
changes B. At least annually or when material changes occur C. Every five years
regardless of circumstances D. Only when the plan reaches a certain asset size
ANSWER : B — Best practice requires annual review and updates when
material changes occur.
Q17. Inflation risk is best hedged by: A. Holding cash equivalents B. Including
real assets such as real estate and TIPS in the portfolio C. Investing only in
short-term bonds D. Avoiding international investments ANSWER : B — Real
assets and inflation-protected securities provide inflation hedging.
Q18. The time horizon for a defined benefit pension plan is typically
determined by: A. The age of the youngest employee B. The duration of the
plan's liabilities C. The retirement age of the CEO D. The average age of all
employees ANSWER : B — DB plan investing should match asset duration to
liability duration.
Q19. Liquidity needs in an IPS refer to: A. The ability to sell investments
quickly at a fair price B. The amount of cash required for distributions and
expenses C. The trading volume of individual securities D. The plan's ability to
borrow money ANSWER : B — Liquidity needs reflect cash flow requirements
for benefits and expenses.
Q20. Strategic asset allocation differs from tactical asset allocation in that: A.
Strategic allocation is long-term policy; tactical involves short-term deviations
B. Strategic allocation is only for large plans C. Tactical allocation is prohibited
by ERISA D. Strategic allocation changes daily ANSWER : A — Strategic
allocation sets the long-term target; tactical allows temporary deviations.
Domain 3: IMPLEMENT — Duty of Loyalty & Care
Key Concepts
• Due diligence in manager selection
• Fee reasonableness and benchmarking
• Conflicts of interest disclosure
QUESTIONS AND VERIFIED ANSWERS LATEST VERSION | TOP RATED
AIF Accredited Investment Fiduciary
Q1. Which of the following best defines a fiduciary under ERISA? A. Any
person who provides investment advice for a fee B. Any person who exercises
discretionary authority or control over plan assets C. Any person who sells
investment products to a plan D. Any person who attends plan committee
meetings ANSWER : B — Under ERISA Section 3(21), a fiduciary is anyone who
exercises discretionary authority or control over plan management or plan
assets.
Q2. The "Duty of Loyalty" requires a fiduciary to: A. Maximize returns
regardless of risk B. Act solely in the interest of plan participants and
beneficiaries C. Follow the advice of investment consultants D. Minimize fees
at all costs ANSWER : B — The Duty of Loyalty (prudent investor rule) requires
acting solely in the interest of beneficiaries.
Q3. Under ERISA, which of the following is NOT a named fiduciary? A. Plan
Administrator B. Investment Manager C. Plan Sponsor's CFO who attends
quarterly meetings but has no authority D. Trustee ANSWER : C — Fiduciary
status is determined by function, not title. Mere attendance without authority
does not confer fiduciary status.
Q4. A plan sponsor hires an investment advisor who has discretionary
authority over plan assets. This advisor is considered a: A. 3(16) fiduciary B.
3(21) fiduciary C. 3(38) fiduciary D. 4(21) fiduciary ANSWER : C — A 3(38)
,investment manager has discretionary authority and takes on fiduciary liability
for investment selection.
Q5. Co-fiduciary liability means that: A. Each fiduciary is only responsible for
their own decisions B. Fiduciaries may be liable for the breach of another
fiduciary if they knowingly participate or fail to take remedial action C. Liability
is always shared equally among all fiduciaries D. Only the plan sponsor has
liability ANSWER : B — Under ERISA Section 405, co-fiduciaries can be liable
for another's breach if they knowingly participate or fail to remedy it.
Q6. The "Prudent Expert" standard under ERISA requires fiduciaries to: A. Act
with the care, skill, prudence, and diligence of a prudent person familiar with
such matters B. Never lose money C. Always beat the market benchmark D.
Only invest in government securities ANSWER : A — The prudent expert
standard requires expertise appropriate to the role.
Q7. Which document should clearly define fiduciary roles and
responsibilities? A. Investment Policy Statement only B. Service agreements
and committee charters C. Marketing brochures D. Trade confirmations
ANSWER : B — Fiduciary roles must be documented in service agreements,
committee charters, and other governance documents.
Q8. A fiduciary who delegates investment management to a 3(38) manager:
A. Is completely relieved of all fiduciary responsibility B. Retains responsibility
for monitoring the 3(38) manager C. Must approve every individual trade D.
Cannot terminate the manager without DOL approval ANSWER : B —
Delegation does not eliminate fiduciary duty; the fiduciary must still monitor
the delegatee.
Q9. Under the Uniform Prudent Investor Act (UPIA), diversification is: A.
Optional if the fiduciary has expertise in a specific sector B. Required unless the
fiduciary reasonably determines that diversification is not prudent C. Only
required for plans over $100 million D. Prohibited for endowment funds
ANSWER : B — UPIA requires diversification unless special circumstances
justify concentration.
Q10. A plan committee member who is not a fiduciary can still be held liable
if they: A. Provide investment education to participants B. Exercise authority or
control they were not formally granted C. Attend meetings but abstain from
voting D. Hire a 3(38) investment manager ANSWER : B — Function
determines fiduciary status; exercising de facto authority creates liability.
,Domain 2: FORMALIZE — Investment Policy & Objectives
Key Concepts
• Investment Policy Statement (IPS) requirements
• Risk and return assumptions
• Asset allocation and diversification
• Benchmark selection
• Time horizon and liquidity needs
Practice Questions
Q11. An Investment Policy Statement (IPS) should include all of the following
EXCEPT: A. Investment objectives and constraints B. Specific stock
recommendations C. Rebalancing policy D. Duties and responsibilities of
parties ANSWER : B — An IPS sets policy and process, not specific security
recommendations.
Q12. The most appropriate benchmark for a diversified equity portfolio is: A.
The S&P 500 Index B. A blended benchmark reflecting the portfolio's strategic
asset allocation C. The 10-year Treasury yield D. The CPI inflation rate
ANSWER : B — Benchmarks should reflect the portfolio's actual asset
allocation, not just one asset class.
Q13. When determining a portfolio's risk tolerance, a fiduciary should
consider: A. Only the participant's stated risk preference B. The plan's time
horizon, liquidity needs, and liability structure C. The investment manager's
track record D. Current market conditions only ANSWER : B — Risk tolerance
must align with the plan's specific objectives and constraints.
Q14. The "efficient frontier" represents: A. The set of portfolios offering the
highest expected return for a given level of risk B. The boundary of acceptable
investments under ERISA C. The maximum loss a portfolio can experience D.
The average return of all asset classes ANSWER : A — Modern Portfolio
Theory defines the efficient frontier as optimal risk/return combinations.
Q15. Rebalancing a portfolio is important because it: A. Eliminates the need
for active management B. Maintains the strategic asset allocation and controls
risk drift C. Guarantees outperformance D. Reduces transaction costs ANSWER
, : B — Rebalancing keeps the portfolio aligned with its target allocation and risk
profile.
Q16. A fiduciary should review the IPS: A. Only when the investment manager
changes B. At least annually or when material changes occur C. Every five years
regardless of circumstances D. Only when the plan reaches a certain asset size
ANSWER : B — Best practice requires annual review and updates when
material changes occur.
Q17. Inflation risk is best hedged by: A. Holding cash equivalents B. Including
real assets such as real estate and TIPS in the portfolio C. Investing only in
short-term bonds D. Avoiding international investments ANSWER : B — Real
assets and inflation-protected securities provide inflation hedging.
Q18. The time horizon for a defined benefit pension plan is typically
determined by: A. The age of the youngest employee B. The duration of the
plan's liabilities C. The retirement age of the CEO D. The average age of all
employees ANSWER : B — DB plan investing should match asset duration to
liability duration.
Q19. Liquidity needs in an IPS refer to: A. The ability to sell investments
quickly at a fair price B. The amount of cash required for distributions and
expenses C. The trading volume of individual securities D. The plan's ability to
borrow money ANSWER : B — Liquidity needs reflect cash flow requirements
for benefits and expenses.
Q20. Strategic asset allocation differs from tactical asset allocation in that: A.
Strategic allocation is long-term policy; tactical involves short-term deviations
B. Strategic allocation is only for large plans C. Tactical allocation is prohibited
by ERISA D. Strategic allocation changes daily ANSWER : A — Strategic
allocation sets the long-term target; tactical allows temporary deviations.
Domain 3: IMPLEMENT — Duty of Loyalty & Care
Key Concepts
• Due diligence in manager selection
• Fee reasonableness and benchmarking
• Conflicts of interest disclosure
