Series 65 Practice Test for Investment Advisors
- April 1, 2025
- Posted by: 'FINRA Exam Mastery'
- Category: Finance
🧾 Series 65 Practice Test for Investment Advisors
📘 Sharpen Your Advisory Skills with Realistic Scenario-Based Questions
The Series 65 exam is essential for professionals who want to become Registered Investment Advisor Representatives (IARs). It focuses on portfolio management, investment recommendations, economic concepts, and ethics. Below is a 10-question practice test tailored for investment advisor scenarios—complete with answers and explanations.
✅ Instructions
- Target time: 15 minutes (90 seconds per question)
- Don’t peek at answers until finished
- Score yourself and review what you missed
🔢 Practice Questions – Investment Advisor Focus
1. A client nearing retirement wants income and capital preservation. Which is the most appropriate asset allocation?
A) 80% equities, 20% cash
B) 40% bonds, 40% equities, 20% cash
C) 20% international equities, 80% tech stocks
D) 70% commodities, 30% equities
2. A client is concerned about inflation eroding her fixed income. Which of the following is the best hedge?
A) Long-term Treasury bonds
B) TIPS
C) Preferred stock
D) Municipal bonds
3. A client asks about mutual fund share classes. Which of the following is TRUE about Class A shares?
A) They have a back-end load
B) They typically have no sales charges
C) They charge a front-end load
D) They are only suitable for small investments
4. Under the Uniform Securities Act, what must an IA disclose to clients?
A) Portfolio performance guarantees
B) Any material conflict of interest
C) The adviser’s home address
D) All client identities
5. Which type of investment risk cannot be eliminated through diversification?
A) Business risk
B) Market risk
C) Financial risk
D) Liquidity risk
6. An adviser uses a Monte Carlo simulation. What is the main benefit of this tool?
A) It predicts the exact return of an asset
B) It analyzes how a portfolio performs in various economic scenarios
C) It calculates a stock’s dividend yield
D) It determines how long a bond will take to reach maturity
7. An investor is seeking growth but can only tolerate moderate risk. Which is the most appropriate fund?
A) Small-cap growth fund
B) Large-cap value fund
C) High-yield bond fund
D) Commodity futures fund
8. Which measure best evaluates risk-adjusted performance?
A) Standard deviation
B) Alpha
C) Sharpe ratio
D) Beta
9. If the Federal Reserve sells securities in the open market, the expected result is:
A) Increase in money supply
B) Decrease in interest rates
C) Increase in bond prices
D) Decrease in money supply
10. A firm has $5M in client assets and chooses not to have custody of client funds. What must it do?
A) File a Form ADV Part 3
B) Meet a $100,000 minimum net worth
C) Disclose that it does not take custody
D) Submit quarterly GAAP audits to the SEC
🧠Answer Key & Explanations
- ✅ B – Balanced and conservative: income + preservation = bonds + cash + some equity
- ✅ B – TIPS (Treasury Inflation-Protected Securities) adjust principal with inflation
- ✅ C – Class A = front-end load (good for long-term, large investors)
- ✅ B – Material conflicts must always be disclosed
- ✅ B – Market (systematic) risk affects the whole market – can’t diversify away
- ✅ B – Monte Carlo simulates how a portfolio might behave in varied conditions
- ✅ B – Large-cap value = moderate risk, decent growth
- ✅ C – Sharpe ratio = return per unit of risk (risk-adjusted measure)
- ✅ D – Selling securities = money leaves system = tighter money supply
- ✅ C – Must disclose custody status to clients clearly (in Form ADV Part 2A)
📊 Your Score
- 9–10 correct: Exam-ready
- 7–8 correct: Solid foundation; polish key concepts
- 5–6 correct: Review risk, disclosure, and Fed tools
- <5 correct: Revisit investment suitability and regulations
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Know the law. Know the math. Know your client. Pass the Series 65.