Question #1 of Which of the following statements regarding the investment management process is most accurate? A) The portfolio is only rebalanced when client circumstances change B) The IPS is the working document between the investment advisor and client C) The IPS should be reviewed annually Explanation The IPS is a working document that continually evolves Any material change in client circumstances or market outlook can require rebalancing At least annually reviewed is appropriate but could be required for any material changes in client circumstances or market conditions Question #2 of Decision-reversal risk is likely to: A) occur when a manager panics during a market crisis B) create a skewed distribution of portfolio return C) occur in large institutional portfolios with exposure to alternative investments Explanation Decision-reversal risk is thoughtlessly reversing a previous investment decision at the worst time It commonly occurs when less knowledgeable investors get into complex positions they not understand, panic when things don't go well, and sell Thoughtless selling when an asset is down would likely reduce upside recovery and create negative (cut of the upside) skew in the returns It refers primarily to the client panicking and is presumably less common in more knowledgeable institutional investors who have more access to investment information Question #3 of Which of the following comments regarding major industry trends is most correct? A) Robo-advisors offer wealth management services without direct contact between the client and manager B) The use of big data is tied to the growth of artificial intelligence C) Passive management is a declining portion of the investment business Explanation The growth of AI has allowed machines to rapidly search big data for relationships at a scale that was not formerly possible Robo-advising can also include some client interaction with the manager Passive management has been a growing portion of the investment business Question #4 of Which of the following is not part of an effective investment governance model? A) The process of setting an asset allocation B) Establishing client objectives C) Determining manager compensation Explanation Determining manager compensation is not directly one of the elements The six elements are: • • • • • • Establish long-term and short-term investment objectives Allocate the rights and responsibilities of all the involved parties Specify processes for creating an investment policy statement (IPS) Specify processes for creating a strategic asset allocation Apply a reporting framework to monitor the investment program's stated goals and objectives Include periodic review of the governance policies by an independent third party Question #5 of Carla Smitz, CFA, is working with new, young clients Terry and Janice Dillard to develop their investment policy statement (IPS) Smitz should most likely take into consideration: A) both their human capital and risk tolerance B) their risk tolerance C) their human capital Explanation If they not have an IPS, the manager should consider everything that relates to their complete financial situation ...A) Robo-advisors offer wealth management services without direct contact between the client and manager B) The use of big data is tied to the growth of artificial intelligence C) Passive management. .. with the manager Passive management has been a growing portion of the investment business Question #4 of Which of the following is not part of an effective investment governance model? A) The. .. elements The six elements are: • • • • • • Establish long-term and short-term investment objectives Allocate the rights and responsibilities of all the involved parties Specify processes for creating