Wealth Management Cheat Sheet

The core ideas of Wealth Management distilled into a single, scannable reference — perfect for review or quick lookup.

PiqCue — piqcue.com/wealth-management/cheatsheet

Quick Reference

Asset Allocation

The strategic distribution of an investment portfolio across different asset classes such as equities, fixed income, real estate, and alternatives, based on the client's goals, risk tolerance, and time horizon to optimize the risk-return tradeoff.

Fiduciary Duty

A legal and ethical obligation requiring a financial advisor to act in the best interest of the client, putting the client's interests ahead of their own, including disclosure of conflicts of interest and avoidance of self-dealing.

Tax-Loss Harvesting

A strategy of selling investments at a loss to offset capital gains taxes on other investments, thereby reducing the overall tax liability while maintaining the desired portfolio exposure by purchasing similar but not identical securities.

Estate Planning

The process of arranging for the management, preservation, and transfer of wealth during life and after death, including wills, trusts, powers of attorney, healthcare directives, and strategies to minimize estate and gift taxes.

Diversification

The practice of spreading investments across different asset classes, sectors, geographies, and securities to reduce portfolio risk, based on the principle that not all investments will move in the same direction at the same time.

Risk Tolerance and Risk Capacity

Risk tolerance is a client's psychological willingness to endure investment losses, while risk capacity is their financial ability to absorb losses without jeopardizing essential goals. Both must be assessed to determine appropriate portfolio construction.

Trust Structures

Legal arrangements in which a trustee holds and manages assets on behalf of beneficiaries according to the terms set by the grantor, used for estate planning, asset protection, tax minimization, and controlled wealth transfer.

Modern Portfolio Theory (MPT)

A framework developed by Harry Markowitz that constructs portfolios to maximize expected return for a given level of risk by selecting the optimal combination of assets based on their expected returns, variances, and correlations.

Rebalancing

The process of periodically realigning portfolio weights back to target allocations by buying and selling assets, ensuring the portfolio does not drift from its intended risk-return profile due to market movements.

Charitable Giving Strategies

Tax-efficient methods for philanthropic giving, including donor-advised funds, charitable remainder trusts, private foundations, and qualified charitable distributions, which provide income tax deductions and estate planning benefits.

Key Terms at a Glance

Alpha:The excess return of an investment relative to a benchmark index, representing the value added (or subtracted) by active management.

Asset Allocation:The strategic distribution of investments across different asset classes to balance risk and reward according to an investor's goals and risk profile.

AUM (Assets Under Management):The total market value of investments that an advisor or firm manages on behalf of clients, often used as the basis for fee calculation.

Beneficiary:A person or entity designated to receive assets from a trust, estate, retirement account, or insurance policy.

Beta:A measure of an investment's volatility relative to the overall market. A beta of 1 indicates market-level volatility; above 1 is more volatile; below 1 is less.

Capital Gain:The profit realized from selling an investment for more than its purchase price, subject to capital gains tax at short-term or long-term rates.

Charitable Remainder Trust:A trust that provides income to the donor or beneficiaries for a specified period, with remaining assets going to a designated charity.

Cost Basis:The original value of an investment for tax purposes, used to calculate capital gains or losses upon sale.

Diversification:The strategy of spreading investments across multiple asset classes, sectors, and geographies to reduce the impact of any single investment's poor performance.

Donor-Advised Fund:A charitable giving account that allows donors to make irrevocable contributions, receive tax deductions, and recommend grants to qualified charities over time.

Estate Planning:The process of arranging for the management and transfer of a person's wealth during life and after death through wills, trusts, and other instruments.

Estate Tax:A federal tax on the transfer of a deceased person's estate above a certain exemption threshold to heirs or beneficiaries.

Fiduciary:A person or entity with a legal and ethical obligation to act in the best interest of another party, such as a client or beneficiary.

Gift Tax:A federal tax on transfers of money or property to another person while receiving nothing or less than full value in return.

Grantor:The person who creates and funds a trust, establishing its terms and transferring assets into the trust structure.

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