Wealth Management Module (Intermediate) Interview Questions

NCFM offers the Wealth Management Module (Intermediate) that will demonstrate your comprehensive and in-depth knowledge of wealth management. For you to successfully pass the interview, you must be able to showcase an understanding of wealth creation and the role of various investment products and structured products in long-term wealth creation as well as the risks associated with such products and services.

You may also go through our Wealth Management Module (Intermediate) Online tutorial to further strengthen your knowledge base. Our Wealth Management Module (Intermediate) Free Practice Tests will further help attain your desired certification and become competent to your employers in an ever-changing job market. To be successful in the interview, professional standards say that you should know about the following topics in advance. And for your assistance, we have compiled below, a list of some highly expected Wealth Management Module (Intermediate) Interview Questions. So let’s begin!

1. How would you define the Wealth Cycle? 

Wealth-cycle is a simple way to look at your entire financial life, figure out your current position, and make investment decisions.

2. What is the importance of risk profiling?

Financial planners use risk profiling to help them understand investors’ probable reactions in different situations. Risk profiling is the first step in the financial planning process. It helps planners evaluate people’s ability and willingness to take risks.

3. How does risk profiling affect investment planning?

Risk profiling allows you to determine the optimum and diversified asset allocation for your investment portfolio. It also simplifies the process of understanding your overall risk tolerance and how it might change with changing market conditions.

4. Can 4 stages of you name the 4 economic cycles?

• Expansion
• Peak
• Contraction
• Trough   

5.  Can you differentiate between revenue deficit and fiscal deficit?

Revenue Deficit is the amount by which government revenue falls short of expenditure. The primary deficit is the result of subtracting interest payments from the fiscal deficits. The government borrows money from individuals and other institutions in the financial market to fund its fiscal deficit. It does so by issuing bonds and treasury bills.

6. Can you tell me about lead and lag indicators?

A leading indicator is a measurement that predicts the future; for example, the percentage of workers wearing hard hats on a building site is a leading safety indicator.  A lagging indicator is a measurement that is not an immediate reflection of output, for example; the number of accidents on a building site is a laggard safety indicator.

7. Is it possible to use both fundamental and technical analysis?

When it comes to investing in shares, there are two main approaches: fundamental analysis and technical analysis. Some investors choose to use one or the other; however, others prefer combining the two as part of an overall strategy.

8. What are the basic principles of technical analysis?

• Markets switch from range expansion to range contraction. 
• Trend continuation is more likely than reversal.  
• Climax or rollover are the two ways in which trends end
• Momentum precedes price.

9. What is the difference between investment and speculation?

Risk is the main factor that differentiates investment from speculation. While investors seek to generate a satisfactory return on their capital by taking on an average or below-average amount of risk, speculators use risky bets in the hope of generating abnormally high profits.

10. What is the relationship between yields and interest rates?

When interest rates rise, the value of existing bonds tends to fall because of the higher yields. Conversely, when interest rates go down, the value of existing bonds tends to rise because of the lower yields. In both cases, the coupon rates remain unchanged.

11. What are the Factors Affecting Credit Risk Modeling?

• Probability of Default (POD)
• Loss Given Default (LGD)
• Exposure at Default (EAD)

12. What is the safest way to buy gold?

Bullion coins and ingots represent a relatively secure way to invest in gold, however, some investors prefer to invest in gold funds, like mutual funds or exchange-traded funds.

13. What are the common ways in which you can invest in real estate?

• Rental Properties. 
• House Flipping. 
• Real Estate Investment Groups (REIGs) 
• Online Real Estate Platforms.

14. Is venture capital the same as private equity?

Venture capital refers to funds invested in small companies with high growth potential. Private equity firms, which invest in established companies, differ from venture capitalists by their preference for stable companies and aversion to risk.

15. How do venture capitalists make money?

• the management fee for managing the firm’s capital
• the interest carried on the return of funds on investment is called “carry”.
• carried interest on the fund’s return on investment generally referred to as the “carry.”

16. What are the types of portfolio management services?

• Discretionary Portfolio Management
• Non-Discretionary Portfolio Management
• Active Portfolio Management
• Passive Portfolio Management 

17. What does the Treynor ratio indicate?

The Treynor ratio is a measure of risk-adjusted performance, calculated as the excess return on a portfolio, divided by the standard deviation of returns. This shows how much return an investment earned for the amount of risk assumed.

18. Can you differentiate between the Treynor ratio and the Sharpe ratio?

The Sharpe Ratio compares an investment’s return with its risk, and the Treynor Ratio compares an investment’s excess return with the risk of the market. Both these ratios are to assess the return considering risk adjustment. 

19. What is the difference between strategic and tactical asset allocation?

Strategic allocations are long-term asset allocations in line with an investor’s risk profile, while tactical allocations deviate from this long-term allocation. Strategic allocations are appropriate for the investor’s goals and financial situation, while tactical allocations deviate from this appropriate allocation based on external factors.

20. Who can claim an exemption under section 54EC of capital gain?

Section 54EC of the Income Tax Act allows an assessee to claim deductions or exemptions on the capital gains he/she earns from selling a long-term specified asset, but only up to the number of gains reinvested in another long-term specified asset. This rule applies only if the new investment was made within six months of selling the old asset.

21. What is set off and carry forward?

When a business reports a loss, it can set off that loss against its income in the same year. If the business doesn’t have any income to set off against the loss it can carry forward that loss to be set off against future income.

22. What are the losses not allowed to set off and carry forward?

If you are not able to use your entire capital loss in the same year, for example, because your capital gains exceed your losses, you may be able to carry both short-term and long-term losses forward for up to 8 assessment years.

23. How are capital gains taxed?

 If you sell an investment after owning it for at least a year, you will pay capital gains tax on the profit. The tax rate depends on your taxable income for the year. High earners pay more.

24. Can I avoid STT?

Short-term transfer tax is applied on the value of transactions and charged to traders/investors in the contract notes issued by your broker. As the brokers are bound to add this tax automatically to the transaction price, avoiding it is not possible. 

25. How does a fixed maturity plan work?

Fixed maturity plans, or FMPs, are a type of debt fund that invests in fixed-income instruments such as certificates of deposit and bonds. The aim is to lock in the yields on these investments so that investors don’t have to worry about fluctuating interest rates.

26. What counts as an asset for probate?

• Real estate
• Vehicles
• Other titled assets, such as stocks and bonds, are owned solely by the deceased person or as a tenant in common with someone else.

27. What is the difference between long-term and short-term capital loss?

To figure out your net capital gain or loss, you need to classify the gains and losses as long-term or short-term. If you hold an asset for more than one year before you sell it, your capital gain or loss is considered long-term. If you hold an asset for one year or less, any profit or loss is short-term.

28. Can you offset long-term capital gains with short-term losses?

Yes, but there are limits to how much you can deduct. Losses on investments are used to offset gains of the same type. So short-term losses offset short-term gains, long-term losses offset long-term gains, and then net losses (short or long term) can be deducted against the other kind of gain.

29. How does an Annual Portfolio Rebalancing Plan Works?

A rebalancing strategy is a process of selling off portions of any segment that is growing faster than the rest and using the proceeds to buy additional portions of other portfolio segments.

30. Why is rebalancing important in asset allocation?

Rebalancing your portfolio allows you to maintain the original asset-allocation strategy you’ve established and helps you keep track of changes you make to your investing style. What rebalancing does is help you stay the course of your investment plan regardless of what the market does. This helps you stick to your risk tolerance levels.