Client Investment Recommendations and Strategies Flashcards
6 cards from real Series 65 – Uniform Investment Adviser Law Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Client Investment Recommendations and Strategies flashcards as text
What is the fiduciary duty of an investment adviser?
Answer: To act in the best interest of the client and put the client's interests ahead of their own
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.
Which of the following is a characteristic of a tax-deferred retirement account?
Answer: Contributions reduce current taxable income and withdrawals are taxed as ordinary income
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.
What is a Roth IRA's primary tax advantage?
Answer: Qualified withdrawals in retirement are tax-free
Roth IRA contributions are made with after-tax dollars, but qualified withdrawals — including earnings — are completely tax-free in retirement.
What is systematic risk?
Answer: Market-wide risk that cannot be eliminated through diversification
Systematic risk (also called market risk) affects the entire market or broad economy and cannot be reduced by diversifying within that market.
What does a passive investment strategy seek to do?
Answer: Replicate the performance of a market index with minimal trading and low costs
Passive investing aims to replicate an index's returns through minimal trading, reducing costs and avoiding the risks associated with active management.
Which of the following best describes a wrap fee account?
Answer: An account that bundles advisory, brokerage, and custodial services into a single annual fee based on assets under management
Wrap fee accounts charge a single all-inclusive annual fee (typically a percentage of AUM) that covers advisory services, brokerage commissions, and custodial costs.