Every industry has its jargon. Those terms for people “in the know” that sometimes help streamline conversations. Here are a few important terms that might need some additional clarity for the average person.
CFP®: A Certified Financial Planner (CFP®) is a professional who has earned certification from the CFP Board. Such certification requires extensive training and experience, as well as adherence to high ethical standards.
Fiduciary: A fancy name for a higher level of accountability, a fiduciary is a trustee who is legally appointed to hold assets for someone. He or she manages the assets for the other person’s benefit versus his or her own.
FINRA: FINRA is the acronym for Financial Industry Regulatory Authority. FINRA was created in July of 2007 as a regulatory body that governs business between brokers, dealers and the public. FINRA is the largest regulatory body (that’s not associated with the government) of U.S. securities firms.
Mutual Fund: Most people can’t take the time to research individual stocks or bonds. A mutual fund is a way to put several stocks and/or bonds together (i.e. mutual) into a group that individuals can then buy shares. Mutual funds charge fees and commissions for packaging stocks together, record keeping and reporting.
Net Worth: A person or company’s net worth is the amount of liabilities (stuff you OWE) subtracted from assets (stuff you OWN.) Liabilities can include mortgages, loans, credit card debt and more. Assets can include investments, real estate, savings, personal property and more.
Portfolio: A portfolio can be composed of bonds, common stocks, preferred stocks and other securities. Portfolios can be managed by financial professionals and/or held by investors.
Prospectus: The Securities and Exchange Commission requires a securities (see definition below) issuer to file a prospectus. It’s a legal document that gives a potential investor details about the investment offering so that he or she can make an informed decision about the purchase.
Securities: Some form of ownership or debt that has been assigned a value and may be sold, like stocks and bonds.
Third-Party Money Manager: A third party money manager is an organization that charges a fee to help design portfolios for individuals. Depending on the strategy employed, a third-party money manager can use individual stocks and bond, mutual funds and other financial vehicles to reach the stated objective.
While there are many more financial terms that anyone would benefit from understanding, this very short list provides a great start on some of the basics.
Conrad Slate, Rick Disharoon, and Will Parrish are Representatives with Cambridge Investment Research and may be reached at (865) 357-7370, by email or www.sdp-planning.com.
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Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Slate, Disharoon, Parrish and Associates LLC are not affiliated.