LOS c: Explain the special issues that alternative investments raise for investment advisers of private wealth clients.

Q1. In the special issues that alternative investments raise for investment advisors of private wealth clients, “decision risk” is associated with:

A)   making hiring and firing decisions and general employee turnover of the investment firm.

B)   assessing the investment opportunity.

C)   changing a strategy at the time the portfolio has incurred a large loss.

Q2. In the special issues that alternative investments raise for investment advisors of private wealth clients, with respect to tax issues and suitability:

A)   suitability is a special issue to consider but tax issues are not.

B)   both are explicitly special issues to consider.

C)   tax issues are a special issue to consider but suitability is not.

Q3. Bernice Clark, CFA, is analyzing the portfolio of a private wealth client. In the process, Clark wants to address special issues that alternative investments raise for her client. The special issues would:

A)   not include measuring the ownership in the client’s corporate bond portfolio and not include measuring the client’s ownership in closely held companies.

B)   include measuring the ownership in the client’s corporate bond portfolio and the client’s ownership in closely held companies.

C)   not include measuring the ownership in the client’s corporate bond portfolio but would include measuring the client’s ownership in closely held companies.

LOS c: Explain the special issues that alternative investments raise for investment advisers of private wealth clients. fficeffice" />

Q1. In the special issues that alternative investments raise for investment advisors of private wealth clients, “decision risk” is associated with:

A)   making hiring and firing decisions and general employee turnover of the investment firm.

B)   assessing the investment opportunity.

C)   changing a strategy at the time the portfolio has incurred a large loss.

Correct answer is C)

Decision risk is the risk of irrationally changing a strategy.

Q2. In the special issues that alternative investments raise for investment advisors of private wealth clients, with respect to tax issues and suitability:

A)   suitability is a special issue to consider but tax issues are not.

B)   both are explicitly special issues to consider.

C)   tax issues are a special issue to consider but suitability is not.

Correct answer is B)

Special issues that advisors for private-wealth clients should address are tax issues, determining suitability, communicating with the client, decision risk, and determining if they have a large position in a closely-held company.

Q3. Bernice Clark, CFA, is analyzing the portfolio of a private wealth client. In the process, ffice:smarttags" />Clark wants to address special issues that alternative investments raise for her client. The special issues would:

A)   not include measuring the ownership in the client’s corporate bond portfolio and not include measuring the client’s ownership in closely held companies.

B)   include measuring the ownership in the client’s corporate bond portfolio and the client’s ownership in closely held companies.

C)   not include measuring the ownership in the client’s corporate bond portfolio but would include measuring the client’s ownership in closely held companies.

Correct answer is C)

Special issues that advisors for private-wealth clients should address are tax issues, determining suitability, communicating with the client, decision risk, and determining if they have a large position in a closely-held company. Measuring the ownership in corporate bonds is not a “special issue.”

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