Wealth Management and Investment Banking Flashcards

What is 'private banking' as a specialized service offering?

Answer: Personalized financial and banking services tailored for high-net-worth individuals

Private banking offers customized financial services—including investment management, estate planning, tax advisory, and concierge banking—exclusively to high-net-worth individuals.

In investment banking, a 'tombstone' advertisement historically served what purpose?

Answer: Publicly announcing the completion of a securities offering or major financial transaction

A tombstone is a formal announcement (named for its rectangular shape resembling a tombstone) published in financial newspapers to publicize the completion of a securities offering.

Which concept in wealth management refers to the risk that a retiree will outlive their financial assets?

Answer: Longevity risk

Longevity risk is the risk that an individual will live longer than expected, depleting their retirement savings before death, making it a central concern in retirement planning.

What is the 'suitability' requirement that wealth managers and brokers must follow when making investment recommendations?

Answer: Ensuring that recommended investments match the client's financial situation, goals, and risk tolerance

The suitability requirement mandates that financial professionals recommend only investments that are appropriate for the specific client based on their financial profile, objectives, and risk tolerance.

In estate planning, what is the function of a 'power of attorney' (POA)?

Answer: Granting a designated person legal authority to act on another's behalf in financial or legal matters

A power of attorney is a legal document that grants a designated individual (the agent or attorney-in-fact) authority to make financial, legal, or medical decisions on behalf of another person (the principal).

Which valuation method in investment banking calculates a company's value based on applying an industry multiple to its earnings (e.g., EBITDA)?

Answer: Comparable company analysis (Comps)

Comparable company analysis values a company by applying valuation multiples (such as EV/EBITDA) derived from similar publicly traded companies to the subject company's financial metrics.