Accredited Wealth Management Advisor (AWMA) Exam 3 Practice Test

What is a primary risk of not incorporating liquidity planning into a wealth plan?

The risk of forced asset sales at inopportune times, reducing wealth. The risk of higher investment returns. There is no risk. It guarantees wealth preservation.

Correct Answer:

The risk of forced asset sales at inopportune times, reducing wealth.

Explanation:

Having liquidity planning means making sure there is cash available to cover ongoing expenses, taxes, emergencies, and required withdrawals without having to touch long-term investments. If you skip this, you risk being forced to sell assets at inopportune times—often during market stress or when prices are unfavorable—to meet cash needs. Those forced sales can lock in losses, reduce overall wealth, and disrupt long-term goals. Higher investment returns aren’t a direct risk of lacking liquidity, and there’s always some risk in any plan—lacking liquidity increases the risk of running short when cash is needed and of failing to preserve wealth over time. It’s not about guarantees; it’s about reducing the chance of needing to sell at bad moments.

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