AWMA Practice Exam I (Accredited Wealth Management Advisor) –
Study & Mock Test (2026)
Baby boomers and older Gen Xers, as compared to millennials and younger Gen Xers
A) have financial planning needs that have stayed relatively the same over many years.
B) have not experienced significant bear markets.
C) are generally seeking many more technological options in financial planning.
D) are likely to be advised by a millennial adviser. - correct answer ✔✔A)
Older wealthy investors (mostly baby boomers) have financial planning needs that have stayed
relatively the same over many years. Younger high net worth individuals are, generally, seeking
fresh approaches to financial planning, including more technological options.
Dan has bonds maturing in two weeks. Since he bought the bonds, interest rates have fallen. To
which one these risks are Dan's bonds most likely to be subject?
A) Interest rate risk
B) Default risk
C) Reinvestment rate risk
D) Financial risk - correct answer ✔✔C)
Reinvestment rate risk is the risk associated with reinvesting interest and/or principal payments
when interest rates have fallen.
The relationship between investment strategy and investment policy is one in which
A)
investment strategy is subservient to investment policy.
B)
,investment strategy dictates the asset categories to be incorporated into the investment policy.
C)
investment policy is established once the investment strategies to be used are agreed upon.
D)
investment policy is determined by investment strategy. - correct answer ✔✔A)
Investment policy provides the guidelines to be used in managing a portfolio, including
investment strategies that may be employed. In other words, investment strategies are
subservient to investment policies.
If ABC Corporation has net profits of $100,000 and distributes $50,000 as dividends, what is its
taxable income?
A) $0
B) $100,000
C) $50,000
D) $25,000 - correct answer ✔✔B)
The net profits of a corporation are subject to federal income taxation. This tax is levied on
corporate taxable income before payment of dividends to common and preferred shareholders.
Thus, if ABC Corporation has net profits of $100,000 and distributes $50,000 as dividends, its
taxable income is still $100,000. Distribution of profits as dividends does not reduce taxable
income for a corporation.
Joseph, age 60, is a taxpayer who has a considerable amount of income that is not subject to
withholding. He has not made any estimated payments during the year. At a planning review
session in mid-December, his adviser informs him that he's approximately $25,000
underwithheld. What course of action might Joseph follow to avoid an underpayment penalty?
A)Make an estimated tax payment before the end of the year. This will make up for any
underwithholding.
,B)Initiate a $25,000 distribution from his IRA account, and direct that 100% of the distribution
be withheld for federal income tax before year-end. This will make up for any underwithholding.
C)Make an estimated tax payment in December and another before the January 15 deadline for
the fourth quarter. This will make up for any underwithholding.
D)No exceptions to the underpayment penalty are available. - correct answer ✔✔B)
Withholding from IRAs, qualified plans, wages, and other income sources is treated as having
been made evenly throughout the year, even if the actual withholding is a lump sum at year-
end. Thus, it is possible for Joseph to "catch up" by having extra federal income tax withheld at
the end of the year.
Which of these statements accurately describe characteristics of using life insurance for the
informal funding of a nonqualified deferred compensation plan?
It represents an asset that may be purchased to fund the employer's unsecured promise to pay
deferred amounts to the employee.
It offers the advantage of being able to fund a death benefit immediately.
It offers the advantage of various settlement options.
It offers the advantage of simplified administration since death proceeds are paid directly to an
employee's surviving spouse or other beneficiary.
A) II and IV
B) I and II
C) I and III
D) I, II, and III - correct answer ✔✔D)
Life insurance is used to informally fund a nonqualified deferred compensation plan because it
can immediately fund a death benefit and offers several settlement options. However, the
proceeds from the policy are paid to the employer.
Which statement best explains the unauthorized practice of law?
, A) A non-attorney who advises a client of potential "red flags" in their estate plan
B) A non-attorney who advises a client to have their estate plan updated
C) A non-attorney who advises a client to take actions that will affect their property or legal
rights
D) A non-attorney who discusses with a licensed attorney whether provisions in their client's
will are necessary - correct answer ✔✔C)
There are two actions that constitute the unauthorized practice of law in every state: drafting
documents that will affect the property or legal rights of someone else, and advising another
person to take actions that will affect their property or legal rights. The other choices are
authorized actions by a non-attorney.
Changes that have occurred since investment firms changed from private partnerships to
publicly traded companies include all of these except
A) partners no longer share in both the profits and losses of the firm.
B) profits can be privatized (bonuses) and losses socialized (bailouts).
C)Nthere is greater individual accountability.
D) risk taking has increased. - correct answer ✔✔C)
The repeal of Glass-Steagall accelerated the conversion of investment firms that had been
structured as partnerships into publicly traded companies that took on more risk. This
transferred much of the risk and accountability from general partners to public shareholders.
The most important stated life goal of wealthy individuals is
A) protecting wealth.
B) assuring retirement lifestyle.
C) leaving an estate to heirs.
D) maintaining good health. - correct answer ✔✔D)
Study & Mock Test (2026)
Baby boomers and older Gen Xers, as compared to millennials and younger Gen Xers
A) have financial planning needs that have stayed relatively the same over many years.
B) have not experienced significant bear markets.
C) are generally seeking many more technological options in financial planning.
D) are likely to be advised by a millennial adviser. - correct answer ✔✔A)
Older wealthy investors (mostly baby boomers) have financial planning needs that have stayed
relatively the same over many years. Younger high net worth individuals are, generally, seeking
fresh approaches to financial planning, including more technological options.
Dan has bonds maturing in two weeks. Since he bought the bonds, interest rates have fallen. To
which one these risks are Dan's bonds most likely to be subject?
A) Interest rate risk
B) Default risk
C) Reinvestment rate risk
D) Financial risk - correct answer ✔✔C)
Reinvestment rate risk is the risk associated with reinvesting interest and/or principal payments
when interest rates have fallen.
The relationship between investment strategy and investment policy is one in which
A)
investment strategy is subservient to investment policy.
B)
,investment strategy dictates the asset categories to be incorporated into the investment policy.
C)
investment policy is established once the investment strategies to be used are agreed upon.
D)
investment policy is determined by investment strategy. - correct answer ✔✔A)
Investment policy provides the guidelines to be used in managing a portfolio, including
investment strategies that may be employed. In other words, investment strategies are
subservient to investment policies.
If ABC Corporation has net profits of $100,000 and distributes $50,000 as dividends, what is its
taxable income?
A) $0
B) $100,000
C) $50,000
D) $25,000 - correct answer ✔✔B)
The net profits of a corporation are subject to federal income taxation. This tax is levied on
corporate taxable income before payment of dividends to common and preferred shareholders.
Thus, if ABC Corporation has net profits of $100,000 and distributes $50,000 as dividends, its
taxable income is still $100,000. Distribution of profits as dividends does not reduce taxable
income for a corporation.
Joseph, age 60, is a taxpayer who has a considerable amount of income that is not subject to
withholding. He has not made any estimated payments during the year. At a planning review
session in mid-December, his adviser informs him that he's approximately $25,000
underwithheld. What course of action might Joseph follow to avoid an underpayment penalty?
A)Make an estimated tax payment before the end of the year. This will make up for any
underwithholding.
,B)Initiate a $25,000 distribution from his IRA account, and direct that 100% of the distribution
be withheld for federal income tax before year-end. This will make up for any underwithholding.
C)Make an estimated tax payment in December and another before the January 15 deadline for
the fourth quarter. This will make up for any underwithholding.
D)No exceptions to the underpayment penalty are available. - correct answer ✔✔B)
Withholding from IRAs, qualified plans, wages, and other income sources is treated as having
been made evenly throughout the year, even if the actual withholding is a lump sum at year-
end. Thus, it is possible for Joseph to "catch up" by having extra federal income tax withheld at
the end of the year.
Which of these statements accurately describe characteristics of using life insurance for the
informal funding of a nonqualified deferred compensation plan?
It represents an asset that may be purchased to fund the employer's unsecured promise to pay
deferred amounts to the employee.
It offers the advantage of being able to fund a death benefit immediately.
It offers the advantage of various settlement options.
It offers the advantage of simplified administration since death proceeds are paid directly to an
employee's surviving spouse or other beneficiary.
A) II and IV
B) I and II
C) I and III
D) I, II, and III - correct answer ✔✔D)
Life insurance is used to informally fund a nonqualified deferred compensation plan because it
can immediately fund a death benefit and offers several settlement options. However, the
proceeds from the policy are paid to the employer.
Which statement best explains the unauthorized practice of law?
, A) A non-attorney who advises a client of potential "red flags" in their estate plan
B) A non-attorney who advises a client to have their estate plan updated
C) A non-attorney who advises a client to take actions that will affect their property or legal
rights
D) A non-attorney who discusses with a licensed attorney whether provisions in their client's
will are necessary - correct answer ✔✔C)
There are two actions that constitute the unauthorized practice of law in every state: drafting
documents that will affect the property or legal rights of someone else, and advising another
person to take actions that will affect their property or legal rights. The other choices are
authorized actions by a non-attorney.
Changes that have occurred since investment firms changed from private partnerships to
publicly traded companies include all of these except
A) partners no longer share in both the profits and losses of the firm.
B) profits can be privatized (bonuses) and losses socialized (bailouts).
C)Nthere is greater individual accountability.
D) risk taking has increased. - correct answer ✔✔C)
The repeal of Glass-Steagall accelerated the conversion of investment firms that had been
structured as partnerships into publicly traded companies that took on more risk. This
transferred much of the risk and accountability from general partners to public shareholders.
The most important stated life goal of wealthy individuals is
A) protecting wealth.
B) assuring retirement lifestyle.
C) leaving an estate to heirs.
D) maintaining good health. - correct answer ✔✔D)
