Below are some commonly used wealth management terms that you may find helpful.
A tax-advantaged education savings plan operated by a state or educational institution. These plans are categorized as either prepaid or savings, and each has separate characteristics.
A profit sharing plan that allows employees to reduce their taxable income by investing a portion of their pre-tax income, which is often matched by the employer. Earnings compound tax free and employee contributions are excluded from federal income tax for the year in which they are contributed. These tax benefits do not extend to withdrawals.
A salary reduction plan for employees of nonprofit organizations and government entities such as schools, hospitals, and educational organizations. Similar to the operation of a 401(k), contributions and earnings are tax-deferred until the money is withdrawn from the plan.
Aggressive Growth Fund
A mutual fund that primarily provides capital gains, often by investing in more volatile stocks, instead of current dividend income.
A report required by the Securities and Exchange Commission (SEC) of any company issuing registered stock, that describes a company's management, operations, and financial reports. Annual reports are sent to shareholders, and must also be available for public review.
A contract, usually with an insurance company, for guaranteed periodic payments for life or for a predetermined number of years.
The amount an asset grows or increases in value.
Any item that may be sold or exchanged by its owner for a value.
A method of allocating funds to pursue the highest potential return at a specific level of risk. Asset allocation normally uses sophisticated mathematical analysis of the historical performance of asset classes to attempt to project future risk and return. Asset allocation is an approach to help manage investment risk. It does not guarantee against investment loss.
A specific category of investments that share similar characteristics and tend to behave similarly in the marketplace.
An examination of the accounting and financial documents of an organization by an independent accountant for accuracy, consistency, and adherence to legal and accounting principles.
A detailed statement of the assets and liabilities of an individual, family or business organization at a given moment in time.
Balanced Mutual Fund
A mutual fund offered by an investment company which attempts to hold a balance of stocks and bonds. Mutual funds are subject to fluctuation in value and market risk. Shares, when redeemed, may be worth more or less than their original cost. Mutual funds are sold only by prospectus. Individuals are encouraged to consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
The person or entity who will receive benefits from a life insurance policy, qualified retirement plan, annuity, trust, or will upon the death of an individual.
A long-term debt instrument issued by a corporation or government entity evidencing the issuer's promise to repay interest at a guaranteed rate on a specified maturity date.
- Short-term Bond - A bond maturing in less than three years from the date of issue.
- Mid-term Bond - A bond maturing in three to ten years from the date of issue.
- Long-term Bond - A bond maturing in ten or more years from the date of issue.
A person or firm registered with the Securities and Exchange Commission to buy and sell securities.
An economic resource that is owned or controlled by an entity or person. Some examples include cash, securities and real estate.
Capital Gain (or Loss)
The difference between the price at which an asset was purchased and the price for which it was sold. When the sale price is higher than the purchase price, the difference is a capital gain; when the sale price is lower than the purchase price, the difference is a capital loss.
Certificate of Deposit (CD)
A deposit with a bank, thrift institution, or credit union that promises a fixed interest rate on funds deposited for a specified period of time. Bank savings accounts and CDs are FDIC insured up to $250,000 per depositor per institution and generally provide a fixed rate of return, whereas the value of money market mutual funds can fluctuate.
Certified Financial Planner® (CFP)
Awarded by the Certified Financial Planner Board of Standards, this designation is characterized by the CFP board as a license. Candidates must pass a comprehensive 10-hour examination testing the candidate's knowledge of financial planning, investments, estate planning, tax and retirement planning, and ethics. Preparation for the examination is via five or more educational courses under a curriculum approved by the CFP Board and offered at more than 100 institutions throughout the United States. Candidates must have three years financial planning experience plus an undergraduate degree to qualify for the award of the license (five years without a degree). CFP licensees are required to renew their license every two years through the completion of 60 hours of continuing education.
Certified Public Accountant (CPA)
Awarded by the 54 U.S. state and territorial boards of accountancy upon the successful completion of four separately scored examinations covering auditing, business law, accounting and reporting on business enterprises, and accounting practices for taxation, managerial, government and nonprofit organizations. CPAs must meet individual state standards for continuing professional education every two years.
Certified Trust & Financial Advisor (CTFA)
A professional credential offered by the American Bankers Association for financial professionals. This mark provides training and knowledge in taxes, investments, financial planning, trusts and estates.
Charitable Lead Trust
A trust established for the benefit of a charitable organization under which the charitable organization receives payment of a specified amount (at least annually) from the trust. On the death of the grantor, remainder interest in the trust passes to his or her heirs. Using a trust involves a complex set of tax rules and regulations. Before moving forward with any trust, we collaborate with your attorney and/or tax advisors to determine if it is line with your financial goals and overall wealth plan.
Charitable Remainder Trust
A trust established for the benefit of a charitable organization under which the grantor can designate an income beneficiary to receive payment of a specified amount, at least annually, from the trust. The grantor may also be the income beneficiary. On the death of the grantor, remainder interest in the trust passes to the charitable organization. Using a trust involves a complex set of tax rules and regulations. Before moving forward with any trust, we collaborate with your attorney and/or tax advisors to determine if it is line with your financial goals and overall wealth plan.
Chartered Financial Analyst (CFA)
Awarded by the Association for Investment Management Research, this technical designation is designed for investment professionals to support the skills required for portfolio management and investment analysis. Candidates for the charter must pass three levels of examination (one exam may be taken per year). Preparation is via self-study of a body of knowledge published by AIMR and includes financial statement analysis, securities regulations, ethics, capital markets, asset allocation, and application of theoretical concepts. Candidates must accrue three years of related experience and establish AIMR membership prior to award of the charter. AIMR does not mandate continuing professional education for maintenance of the CFA charter.
Chartered Financial Consultant (ChFC)
Awarded by The American College, this designation is based on the completion of eight graduate level courses offered by the College. Candidates qualify sequentially through separate post-course examinations. Courses, five of which are approved by the CFP Board as preparation for the CFP license, include financial planning, investments, estate planning, tax and retirement planning. Candidates must have two years related business experience plus an undergraduate degree to qualify for award of the ChFC (three years without a degree). Designees who matriculated after June 30, 1989 must renew their designation every two years with the completion of 30 hours of continuing education (designees who began their ChFC studies prior to the 1989 deadline may not be required to prove their attendance at continuing education programs).
An account established in a bank, brokerage firm, or mutual fund on behalf of another, particularly an account established by a parent for a child.
The practice of accounting as a non-cash expense the cost of an asset over time, even though the asset may, in fact, be appreciating in value.
A payment made from corporate net profits to shareholders, on the vote of the board of directors. Common share dividends usually fluctuate according to profit levels; preferred shares usually pay fixed dividends.
In lieu of receiving a cash dividend, dividend reinvestment allows investors to use their dividends to purchase additional shares of the same stock or mutual fund.
The market value of property or a business, less liens and other claims against it; the owner's interest in an asset.
The person or institution appointed by the court to distribute the estate of a decedent when there is no will or when the will fails to name an appropriate executor/personal representative.
The preparations necessary to manage a person's financial and healthcare matters during his or her lifetime and to effectively and economically distribute the assets within that estate upon his or her death.
Federal and/or state taxes that may be levied on the assets of a deceased person upon his or her death. These taxes are paid by the deceased person's estate rather than his or her heirs.
The person named by will to carry out the wishes of the decedent.
Financial and Wealth Planning
A process of money management that may include any or all of several strategies, including budgeting, tax planning, insurance, retirement and estate planning, and investment strategies. In effective financial planning, all elements are coordinated with the aim of building, protecting, and maximizing net worth.
Individual Retirement Account (IRA)
A retirement savings program that allows certain individuals to make tax-deductible contributions up to a specified limit each year; earnings are not taxed until the funds are withdrawn, usually during retirement.
A trust in which the grantor gives away all rights of ownership and that may not be revoked.
The ability to easily exchange an asset for cash; generally an asset is considered liquid if it can be converted to cash in 30 days or less.
An asset that can be easily and quickly converted to purchasing power without loss of value.
A trust created by a living person which allows that person to control the assets he or she contributes to the trust during his or her lifetime and to direct their disposition upon his or her death.
The one-time disbursement of the complete proceeds of a profit sharing or pension plan, an annuity, or similar account.
Market Capitalization (Large-Cap, Mid-Cap Small-Cap)
The total value of the tradable shares of a publicly traded company; it is equal to the share price times the number of shares outstanding. As outstanding stock is bought and sold in public markets, capitalization could be used as a proxy for the public opinion of a company's net worth and is a determining factor in some forms of stock valuation.
- Large-Cap: Greater than $10 billion
- Mid-Cap: $5 - $10 billion
- Small-Cap: Less than $5 billion
The date on which a debt instrument, such as a loan or bond, becomes due and payable.
The market that exists for short-term debt instruments such as negotiable certificates of deposit (CDs), commercial paper, banker's acceptances, Treasury bills (T-bills), and other short-term instruments characterized by safety and liquidity.
Money Market Fund
A mutual fund that invests in short-term debt instruments.
A long-term promissory note issued by a state or local government. Usually, interest is exempt from federal income tax and state tax within the state where the bond is issued.
A fund created by a management company in which the money of many individual investors is pooled to purchase a diversified portfolio of securities.
A group of investments held by an individual or an institution. A portfolio implies holdings of more than one stock, bond, commodity, or real estate investment for the purpose of diversification.
A trust that can be altered or canceled by its grantor. During the life of the trust, any income earned is distributed to the grantor; upon the grantor's death, the contents of the trust are transferred to its beneficiaries according to the terms of the trust.
The ability to move funds from one investment vehicle to another similar vehicle without incurring a gain or loss; usually refers to the transfer of retirement funds from a qualified retirement plan into a rollover IRA or to the gains from the sale of a principal residence that are used to purchase a new home.
An individual retirement account in which a person can set aside after-tax income up to a specified amount each year. Once invested for 5 years, contributions and earnings on the account are tax-free. In addition, there is no mandatory withdrawal - like with a traditional IRA.
An individual retirement arrangement under which an IRA is established for a non-working spouse and is funded with contributions from the working spouse. Spousal and non-spousal IRAs are subject to combined annual contribution limits and must meet certain requirements.
An instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation's assets and profits. Ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding.
An investment whose earnings are not taxable until they begin to be withdrawn.
A short-term U.S. government paper sold in minimum denominations of $10,000 at auction through the Federal Reserve Banks; maturities range from 13 to 52 weeks.
U.S. Government paper with a maturity of not less than one year and not more than 10 years; issued in denominations of $1,000 and $5,000.
A legal arrangement that creates a separate entity which can own property and is managed for the benefit of a beneficiary. A living trust is created while its grantor is still alive. A testamentary trust is created upon the grantor's death - usually by another trust or by a will. Using a trust involves a complex set of tax rules and regulations. Before moving forward with any trust, we collaborate with your attorney and/or tax advisors to determine if it is line with your financial goals and overall wealth plan.
An individual, corporation, or other entity that manages property held in a trust.
A contract with the insurance company and the purchaser (or annuitant). Earnings accumulate tax-deferred and are based on the performance of the sub-accounts selected by the owner.