CIC Assessing Client Investment Goals 3

Question 1

Which of the following is a CONSTRAINT rather than an investment objective when defining client goals?

Accepted Answer

Liquidity requirements

Answer

Liquidity requirements constrain how a portfolio is managed; return, appreciation, and income are objectives.

Question 2

A client's marginal tax rate is 37%. Which account type should hold high-yield bonds to optimize after-tax returns?

Accepted Answer

Tax-deferred account (IRA/401k)

Answer

High-yield bonds generate ordinary income taxed at 37%; sheltering them in a tax-deferred account eliminates current-year tax drag.

Question 3

When a client says her goal is to 'grow wealth,' what is the counselor's most important next step?

Accepted Answer

Quantify the goal with specific dollar amounts, time frames, and required return

Answer

Vague goals must be translated into specific, measurable targets before an appropriate strategy can be designed.

Question 4

A couple plans to fund their child's college education starting in 8 years. This goal is best characterized as:

Accepted Answer

Specific, time-bound, and capital-certain at a defined future date

Answer

Education funding has a hard deadline with known costs, making it a defined-date liability requiring capital certainty by year 8.

Question 5

Which risk assessment approach examines how a client historically reacted during past market downturns?

Accepted Answer

Behavioral risk profiling

Answer

Behavioral risk profiling uses actual past behavior — panic selling, holding, or buying the dip — to gauge true risk tolerance.

(CIC) Certified Investment Counselor Practice Test