WMS Cheat Sheet 2026

The 30 highest-yield WMS facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Which retirement account type is funded with after-tax dollars, grows tax-free, and has no required minimum distributions during the owner's lifetime? → Roth IRA
2. What is the primary purpose of a disability buy-sell agreement funded by insurance? → To fund the purchase of a disabled owner's business interest
3. Which document type grants an individual the legal authority to make financial decisions for a principal who has already become incapacitated? → Immediate (non-springing) durable power of attorney
4. Under the Bank Secrecy Act, currency transaction reports (CTRs) must be filed for cash transactions exceeding: → $10,000
5. Which provision of ERISA requires plan fiduciaries to act prudently and solely in the interest of plan participants and beneficiaries? → Section 404 — Fiduciary Duties
6. How should risks be prioritized? → Based on probability of occurrence and potential impact
7. A testator wants certain assets to bypass probate and pass directly to named beneficiaries. Which of the following accomplishes this for a brokerage account? → Titling the account as Transfer on Death (TOD)
8. What is the primary purpose of risk management in wealth planning? → To identify and reduce financial threats
9. A wealth manager who discovers mid-engagement that a client's situation is outside their competence should FIRST: → Disclose the limitation and refer the client to a qualified specialist
10. What is the first step in the risk management process? → Identify potential risks through systematic analysis
11. A wealthy client wants life insurance primarily as an estate planning tool to pay estate taxes. Which policy structure is most tax-efficient for this purpose? → Second-to-die (survivorship) life insurance held in an ILIT
12. What is risk mitigation? → Taking actions to reduce the likelihood or impact of identified risks
13. Which factor is most important when evaluating market trends? → The sustainability and direction of the trend over time
14. What does the 'elimination period' in a disability income policy represent? → The waiting period before disability benefits begin
15. When assessing a client's risk capacity, which factor is MOST relevant? → The client's financial ability to absorb potential losses without compromising goals
16. Which type of income from municipal bonds is generally exempt from federal income tax? → Interest income from most municipal bonds issued by state and local governments
17. What should a practitioner do when regulations conflict with employer policies? → Follow the regulation, as legal requirements supersede employer policies
18. A client wants to save $500,000 in 15 years. If their account earns 6% annually, approximately how much must they save each month? → $2,074
19. A WMS professional is approached by a client asking for a personal loan from the advisor's own funds. Which ethical principle is most directly implicated? → Conflicts of interest
20. Which portfolio rebalancing trigger method sets fixed percentage deviation thresholds before rebalancing occurs? → Threshold rebalancing
21. A client received a $500,000 life insurance death benefit. Under federal income tax rules, this benefit is generally: → Income-tax-free to the beneficiary
22. What is the primary role of a trust in estate planning? → To avoid probate and manage asset distribution
23. A client's portfolio suffers a 40% loss. What percentage gain is required to return to the original value? → 67%
24. Which asset class is generally considered the best long-term hedge against inflation in a wealth management portfolio? → Real assets such as equities, real estate, and commodities
25. When presenting investment performance to clients, a WMS professional is ethically obligated to: → Present performance accurately, including relevant benchmarks and full disclosure of fees
26. A QTIP trust is frequently used in second-marriage estate planning. What does QTIP stand for? → Qualified Terminable Interest Property
27. How soon after a service or session should documentation be completed? → As soon as possible, ideally within 24 hours
28. What is a key component of building long-term client trust? → Maintaining open and honest communication
29. Which measure divides the portfolio's excess return over the risk-free rate by its total standard deviation? → Sharpe ratio
30. Which scenario best illustrates sequence-of-returns risk for a retiree? → Experiencing large market losses early in retirement while withdrawing funds