Series 65 – Uniform Investment Adviser Law Exam Client Investment Recommendations and Strategies 2

Question 1

What is the fiduciary duty of an investment adviser?

Accepted Answer

To act in the best interest of the client and put the client's interests ahead of their own

Answer

Investment advisers registered under the Investment Advisers Act owe a fiduciary duty to clients, requiring them to act in the client's best interest at all times.

Question 2

Which of the following is a characteristic of a tax-deferred retirement account?

Accepted Answer

Contributions reduce current taxable income and withdrawals are taxed as ordinary income

Answer

In tax-deferred accounts like traditional IRAs and 401(k)s, contributions may reduce current taxable income, and withdrawals in retirement are taxed as ordinary income.

Question 3

What is a Roth IRA's primary tax advantage?

Accepted Answer

Qualified withdrawals in retirement are tax-free

Answer

Roth IRA contributions are made with after-tax dollars, but qualified withdrawals — including earnings — are completely tax-free in retirement.

Question 4

What is systematic risk?

Accepted Answer

Market-wide risk that cannot be eliminated through diversification

Answer

Systematic risk (also called market risk) affects the entire market or broad economy and cannot be reduced by diversifying within that market.

Question 5

What does a passive investment strategy seek to do?

Accepted Answer

Replicate the performance of a market index with minimal trading and low costs

Answer

Passive investing aims to replicate an index's returns through minimal trading, reducing costs and avoiding the risks associated with active management.

Series 65 – Uniform Investment Adviser Law Exam Practice Test

Series 65 – Uniform Investment Adviser Law Exam Practice Test

Series 65 – Uniform Investment Adviser Law Exam Client Investment Recommendations and Strategies 2