Cornerstone

Private Wealth Pathway

CFA® Level III pathway, published weight 30–35%. Goals-based planning, tax efficiency, human capital, wealth transfer.

What the outline covers

Sample questions

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Question 1

A client has a high-priority goal three years away and a lower-priority aspirational goal thirty years away. Goals-based allocation would fund the near-term goal with:

A. A high-equity sub-portfolio to maximise expected value
B. A low-risk sub-portfolio regardless of overall risk tolerance
C. The same allocation as the aspirational goal
D. Illiquid private assets for the return premium

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B. Each goal is funded according to its own horizon and required probability of success. A high-priority near-term goal requires low-risk assets.

Reading: Private Wealth Pathway — Investment Planning

Question 2

A senior executive holds substantial employer stock and derives employment income from the same firm. The most appropriate recommendation is:

A. Increase the employer stock position to align interests
B. Reduce the concentration because human and financial capital are correlated
C. Hold the position because it is tax-efficient
D. Hedge only the employment income

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B. Human capital and financial capital are highly correlated here, so a shock to the employer hits both simultaneously. Diversification is the remedy.

Reading: Private Wealth Pathway — Wealth Planning

Question 3

An asset returns 6% annually and is taxed at 30% on an accrual basis. Over ten years the after-tax accumulation factor is closest to:

r = 6% · t = 30% · n = 10

A. 1.34×
B. 1.51×
C. 1.79×
D. 1.26×

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B. After-tax return = 6% × (1 − 0.30) = 4.2%. (1.042)¹⁰ = 1.508×. Taxing only at the end would give a higher figure.

Reading: Private Wealth Pathway — Preserving the Wealth

Question 4

Asset location refers to the decision about:

A. Which countries to invest in
B. Which account type holds each asset class
C. The proportion held in each asset class
D. The custodian used for each holding

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B. Asset location places heavily taxed assets in tax-advantaged accounts and tax-efficient assets in taxable accounts, without changing the allocation.

Reading: Private Wealth Pathway — Preserving the Wealth

Question 5

A lifetime gift is most likely to dominate a bequest when the recipient has:

A. A higher tax rate and a short horizon
B. A lower tax rate and a long horizon
C. The same tax rate and a short horizon
D. A higher tax rate and a long horizon

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B. A lower recipient tax rate and a longer compounding period both raise the relative value of gifting today rather than transferring at death.

Reading: Private Wealth Pathway — Transferring the Wealth

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