Series 65 Client Types & Profiles Practice Questions
Client Types & Profiles makes up 3 of every 50 questions on a Tigertest Series 65 practice test. Here are 10 of the 12 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on NASAA's Series 65 test specifications. Original questions; 50 per test, weighted like the real 130-question exam. Not affiliated with NASAA or FINRA.
1. Two doctors open a practice as a general partnership. Their main exposure is that each partner:
- A.Cannot withdraw profits
- B.Is personally liable for its debts
- C.Is liable only to the amount invested
- D.Pays corporate income tax
Answer: B. General partners have unlimited personal liability for the partnership's obligations. Limited partners and LLC members are protected up to their investment.
2. Which business form avoids double taxation and gives every owner limited liability, with no cap on the number of owners?
- A.A general business partnership
- B.A sole proprietorship
- C.A Subchapter C corporation
- D.A limited liability company
Answer: D. An LLC passes income through to its members, like a partnership, while protecting them from the firm's debts. A C corporation pays tax itself and shareholders pay again on dividends.
3. An S corporation differs from a C corporation mainly because it:
- A.Passes income to shareholders
- B.Gives owners unlimited liability
- C.Has unlimited shareholders
- D.Pays a flat corporate tax
Answer: A. An S corporation is a pass-through: profits and losses flow to shareholders' returns. It is limited in the number and type of shareholders it may have.
4. An adviser manages money for a private foundation. Her duty runs to:
- A.Its largest donor personally
- B.The adviser's own firm
- C.The foundation itself
- D.The founding family's wishes
Answer: C. A foundation is a separate legal entity, so its trustees or board direct the account and the adviser serves the foundation's charitable purpose, not individual donors.
5. Before recommending anything, an adviser's first step with a new client is to:
- A.Run a performance report
- B.Pick a benchmark index
- C.Gather the client's facts
- D.Choose an asset allocation
Answer: C. Recommendations rest on the client profile: goals, income, net worth, taxes, time horizon and risk tolerance. Data gathering comes before analysis.
6. A client's balance sheet shows $40,000 of credit card debt at 22% and $5,000 in savings. A reasonable first recommendation is to:
- A.Pay down the card debt
- B.Fund a variable annuity
- C.Open a margin account
- D.Buy growth stocks
Answer: A. Paying off 22% debt is a sure 22% return, far above what most investments can reliably earn, and it frees cash flow.
7. A client says she could not sleep if her account fell 10%. This describes her:
- A.Tax situation
- B.Time horizon
- C.Liquidity needs
- D.Risk tolerance
Answer: D. Risk tolerance is the willingness and ability to accept losses and volatility. A client may have a long time horizon and still a low tolerance.
8. A client refuses to sell a stock until it gets back to the price she paid, even though its prospects have worsened. This is mainly:
- A.Overconfidence
- B.Anchoring
- C.Herd behavior
- D.Recency bias
Answer: B. Anchoring ties decisions to an irrelevant reference point, here the purchase price. Loss aversion often feeds the same reluctance to sell at a loss.
9. A client pours money into the sector that did best last year, expecting the trend to continue. This is:
- A.Loss aversion
- B.Recency bias
- C.Anchoring
- D.Mental accounting
Answer: B. Recency bias gives too much weight to recent events. Chasing last year's winners is a common result.
10. A client asks to avoid fossil fuel and weapons companies in her portfolio. The adviser should treat this as:
- A.A risk tolerance score
- B.An unsuitable request
- C.A reason to decline the account
- D.A values-based constraint
Answer: D. Values-based preferences, such as ESG or religious screens, are nonfinancial considerations the adviser records in the profile and builds into the portfolio.
Practice all 12 client types & profiles questions, and the rest of the 200-question bank, in the free Series 65 training sets. Questions you miss come back until you have mastered them.
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