Accredited Wealth Management Advisor Practice Exam

What is the primary role of a liquidity manager in wealth management?

1. To monitor alternative investments for liquidity risk

2. To monitor bond investments for liquidity

3. To keep cash and cash equivalent percentage of the portfolio at a specified amount

4. To handle large assets, such as yachts, multiple homes, and private aircraft

The correct answer is: To handle large assets, such as yachts, multiple homes, and private aircraft

The primary role of a liquidity manager in wealth management involves ensuring that a client has adequate liquidity to meet their financial obligations and investment opportunities without having to sell other investments at unfavorable times. Keeping cash and cash equivalents at a specified percentage of the portfolio, which is crucial for maintaining this liquidity, aligns more closely with typical responsibilities of a liquidity manager. By managing liquid assets appropriately, ensuring that the liquidity needs are met can prevent clients from having to liquidate investments during market downturns or other adverse conditions, potentially at a loss. This aspect of managing liquidity is critical in overall wealth management, as it ensures the client's ability to capitalize on opportunities or meet immediate financial needs. The focus on handling large assets, such as yachts and multiple homes, while an important aspect of wealth management, does not specifically pertain to the management of liquidity and cash flow in the same manner that maintaining a specific percentage of cash equivalents does. Therefore, the role primarily revolves around monitoring and managing liquidity in the context of overall financial health and readiness for investments or withdrawals, not just managing large, less liquid assets. In summary, the key responsibilities involve ensuring sufficient liquidity is available through cash and cash equivalents, supporting the overall strategy of wealth management, which is vital for both planned and