Wealth Management: Planning, Portfolio Construction, and the Advisory Process
The planning spine
Wealth management questions test whether you can move from a client's facts to a defensible recommendation. Know the sequence: establish goals and constraints, gather quantitative and qualitative data, analyze gaps, recommend, implement, and monitor. Be fluent in the vocabulary of risk tolerance versus risk capacity (willingness versus ability to bear loss), time horizon, liquidity needs, and tax status. Understand the investment policy statement as the governing document that converts goals into permissible allocations, and know that it must be revisited after material life events, not merely on a calendar.
Portfolio construction concepts
Expect items on asset allocation as the dominant driver of return variability, diversification limits, correlation, rebalancing bands, and the difference between strategic and tactical allocation. Know the mechanics of dollar-cost averaging, systematic withdrawal, and sequence-of-returns risk for clients near or in retirement. Be able to discuss risk-adjusted return measures conceptually and why a higher-return portfolio may be inappropriate if it breaches the client's capacity for drawdown.
Traps to watch
Questions often embed a conflict between stated tolerance and actual capacity, or between a client's desired return and a realistic required return. Another common trap is treating past performance or a single strong year as evidence of manager skill. Watch for tax-before-return reasoning: after-tax outcomes, not gross returns, fund client goals. Also distinguish suitability from fiduciary duty when the question describes an adviser acting in a trusted capacity.
Worked rule of thumb
If a client needs 5% real growth and the portfolio's expected return after fees and taxes is 4%, the gap must be closed by saving more, spending less, delaying the goal, or accepting more risk - in that order of preference, because raising risk is the least reliable lever. State the trade-off explicitly rather than silently increasing equity exposure.