CIM Client Relations 2

Question 1

A new client says they have high risk tolerance but would sell everything after a 10% loss. How should the manager set the portfolio's risk level?

Accepted Answer

Weight the lower behavioral risk tolerance and explain the inconsistency to the client

Answer

When stated willingness conflicts with likely behavior, managers should go with the more conservative assessment and talk it through with the client.

Question 2

Which factor mainly determines a client's ABILITY to bear risk, as opposed to their WILLINGNESS?

Accepted Answer

Time horizon, wealth relative to needs, and liquidity requirements

Answer

Ability to take risk depends on objective financial circumstances such as horizon, asset base, and spending needs.

Question 3

What is the primary purpose of an Investment Policy Statement (IPS)?

Accepted Answer

To document the client's objectives, constraints, and the guidelines for managing the portfolio

Answer

The IPS records return and risk objectives, constraints, and the governance of the relationship.

Question 4

Which of the following is NOT one of the standard IPS constraints?

Accepted Answer

Benchmark outperformance target

Answer

Standard constraints are liquidity, time horizon, taxes, legal/regulatory, and unique circumstances; a return target is an objective.

Question 5

A client's spouse calls asking for account balances, but the account is solely in the client's name with no authorization on file. What should the manager do?

Accepted Answer

Decline to disclose and get written authorization from the client first

Answer

Client confidentiality means account information goes only to authorized parties.

CIM - Chartered Investment Manager Practice Test

CIM - Chartered Investment Manager Practice Test

CIM Client Relations 2