Wealth Management Strategies Flashcards

Which document formally captures a client's investment objectives, risk tolerance, constraints, and return expectations?

Answer: Investment Policy Statement

An Investment Policy Statement (IPS) is a formal agreement that codifies a client's goals, constraints, benchmarks, and guidelines to govern portfolio management decisions.

Human capital is best described as the present value of which future financial stream?

Answer: Earned income from labor

Human capital represents the present value of all future labor income a person expects to earn over their working life, forming a major component of total wealth early in a career.

Which tax-advantaged account allows high-deductible health plan participants to invest pre-tax dollars for medical expenses?

Answer: Health Savings Account

A Health Savings Account (HSA) offers a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

A family office differs from a private bank primarily in that it provides services exclusively to which client group?

Answer: A single ultra-high-net-worth family or small group of families

A family office is a private wealth management firm established to serve the comprehensive financial and personal needs of one family (single-family office) or a few families (multi-family office).

In behavioral finance, which bias causes investors to hold losing positions too long because selling would confirm the loss?

Answer: Disposition effect

The disposition effect describes investors' tendency to sell winning investments too quickly while holding losing investments too long to avoid realizing a loss.

Which charitable giving vehicle allows a donor to receive an immediate tax deduction, invest the gift, and recommend grants over time?

Answer: Donor-advised fund

A donor-advised fund lets donors make an irrevocable contribution, receive an immediate charitable deduction, and then recommend grants to charities at any future time.