ICWIM Exam Dumps : International Certificate in Wealth & Investment Management

Why Affordability is the Major Constraint

A client’s ability to mitigate risks is directly limited by their financial resources.

Even the most sophisticated risk strategies, such as diversification, derivatives, or insurance, require financial capacity.

Other Options Analyzed

Age: Impacts risk tolerance but does not constrain the financial ability to manage risks.

Risk aversion: A behavioral factor, not a financial constraint.

Tax implications: Important but secondary compared to affordability.

ICWIM Textbook, Chapter on Investment Constraints: Highlights affordability as the top financial constraint.

Wealth Planning Principles: Discusses practical limitations of risk mitigation strategies.

ReferencesThus, the answer isB. Affordability.

Minimum Efficient Scale:

This is the point where a company achieves the lowest average cost per unit due to economies of scale.

Once this level is reached, the firm can afford to lower prices to remain competitive and expand market share.

Elimination of Other Options:

A: Halting expansion would waste the cost advantages achieved.

B: Accelerating output expansion could lead to diseconomies of scale.

C: Increasing unit prices is counterintuitive at this stage.

References:

ICWIM Module 3: Coverage of cost structures and the theory of the firm.

Active Fund Management

Active fund managers aim to outperform or avoid underperforming their peers by dynamically managing asset allocation.

Asset allocation by consensusensures alignment with the strategies and expectations of the broader investment community, minimizing the risk of significant divergence from the peer group.

Why the Answer is A

Using consensus-driven allocation avoids extreme deviations in performance relative to peers, which is key for managers seeking to maintain competitive performance.

Why Other Options are Incorrect

B. Assessing prospects: This involves market analysis but does not specifically address peer performance.

C. Hedging risks: Focuses on risk management, not peer alignment.

D. Quantitative models: Useful for analysis but not tailored to peer group considerations.

ICWIM Study Guide, Chapter on Portfolio Management: Discusses consensus-driven asset allocation.

Active Fund Management Literature: Highlights peer-relative performance strategies.

ReferencesThus, the correct answer isA. Through the use of asset allocation by consensus.