Wealth Management Strategies Flashcards

Which client profiling dimension measures the financial capacity to absorb losses without affecting lifestyle?

Answer: Risk capacity

Risk capacity refers to the objective, financial ability to withstand investment losses based on income, assets, time horizon, and liabilities.

A goals-based wealth management approach primarily aligns a client's portfolio with which factor?

Answer: Specific life goals and time horizons

Goals-based wealth management structures separate sub-portfolios around specific client objectives such as retirement, education funding, or legacy, each with its own time horizon and risk level.

Which legal structure allows a high-net-worth family to consolidate investments, centralize governance, and pass assets to heirs?

Answer: Family limited partnership

A family limited partnership consolidates family assets under a single entity, providing centralized management, potential valuation discounts, and a structured transfer of wealth.

The net worth of an individual is calculated as total assets minus which financial obligation?

Answer: Total liabilities

Net worth equals total assets minus total liabilities, providing a snapshot of an individual's financial position at a given point in time.

Which investment vehicle provides accredited high-net-worth investors access to private equity, hedge funds, and real assets?

Answer: Alternative investment fund

Alternative investment funds encompass private equity, hedge funds, real assets, and other non-traditional strategies that are typically accessible only to accredited or qualified investors.

Liability-driven investing (LDI) is primarily used by which type of client to match assets against future obligations?

Answer: Defined benefit pension plans

LDI strategies are designed for defined benefit pension plans and insurance companies that must fund specific future cash obligations and seek to minimize surplus volatility.