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Wealth Management Glossary
Asset Allocation Plan - The process of dividing investments among different kinds of assets, such as stocks, bonds, real estate and cash, to optimize the risk/return tradeoff based on an individual's or institution's specific situation and goals. A key concept in financial planning and money management.
Balance Sheet - A financial statement that shows the assets, liabilities and owners' equity at a particular date.
Bond - A contract between a borrower and a lender in which the borrower promises to pay the face value at maturity and to pay interest at a specified rate at regular intervals. Also called a "debt security," bonds are usually issued by government agencies, municipalities and corporations.
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.
Broker - An agent who handles the public's orders to buy and sell securities, commodities or other property. For this service a commission or fee is charged.
Capital Asset - An economic resource that is owned or controlled by an entity or person. Some examples include cash, securities and real estate.
Capital Gain - An increase in the value of a capital asset, calculated by the difference in price at which an investment was purchased and the price at which it was sold. An unrealized capital gain is an investment that hasn't been sold yet but would result in a profit if sold.
Long-term Capital Gain - Gain on the sale of a capital asset held for more than 12 months (for most types of capital assets). See capital asset.
Short-term Capital Gain - Gain on the sale of a capital asset held for one year or less. See capital asset.
Capital Loss - A decrease in the value of a capital asset, calculated by the difference in price at which an investment was purchased and the price at which it was sold. Opposite of capital gain.
CDFA® Designation - The role of the CDFA® is to assist the client and his/her lawyer to understand how the financial decisions he/she makes today will impact the client's financial future. A CDFA® is someone who comes from a financial planning, accounting or legal background and goes through an intensive training program to become skilled in analyzing and providing expertise related to the financial issues of divorce.
CFP® Certification - The CFPÂ®, CERTIFIED FINANCIAL PLANNER® and certification marks are financial planning credentials awarded by Certified Financial Planner Board of Standards Inc. (CFP Board) to individuals who meet education, examination, experience and ethics requirements. A Certified Financial Planner must pass a series of exams and enroll in ongoing education classes. Knowledge of estate planning, tax preparation, insurance, and investing is required.
Dealer - An individual or firm in the securities business who buys a security for its own account (at its bid price) or sell from its own account (at its ask price). Dealers earn their profits from mark-up and mark-down, never from commission. The same individual or firm may function, at different times, either as broker or dealer.
Discretionary account - An account in which the customer gives authority in writing to the representative to exercise his/her own judgment with respect to purchasing or selling securities without obtaining the client's prior approval on the details of each trade.
Dividend - A payment of cash or stock that is distributed to shareholders. Dividends are financed by profits, and are announced by the company's board of directors before they are paid.
Dividend Reinvestment - 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.
Equity - Total assets minus total liabilities equals owner's equity or net worth or book value. It also refers to ownership interest in a corporation in the form of common stock or preferred stock. In real estate, it is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house).
Fee-based Asset Management/Financial Planning - Financial planning services which are paid for on a flat fee or an hourly basis, rather than on a commission basis, in order to eliminate potential conflicts of interest.
Fiduciary - A person, company or association who is responsible for investing the assets of the beneficiary in a prudent manner, for example a Registered Investment Advisor, a trustee, etc.
Investment advisory services - A business that specializes in providing investment advice for a fee. All advisers of an advisory service must be registered with the Securities and Exchange Commission.
Investment Advisor Representative (IAR) - An individual who is licensed with a Registered Investment Advisor to offer investment advice.
Liquidity - The ability to quickly convert an investment to cash without suffering a noticeable loss in value.
Living Will - A document, which allows people to specify in advance of an illness or injury medical treatments to be administered or withheld.
Market Risk - The volatility of a stock price relative to the overall market as indicated by a measurement called beta. Beta measures the volatility of a stock to the market as a whole. When a stock is said to have a beta higher than 1, it is expected to move up or down more than the market. When beta is below 1, the stock is expected to move less than the market.
Municipal Bond - A debt instrument issued by a state or local government in which the interest may be exempt from federal income taxation, and also may be exempt from state and local tax in the issuing state. Some municipal bonds may be subject to alternative minimum tax.
Registered Investment Advisor (RIA) - An entity registered with the SEC or state to offer investment advice. Regulated under the 1940 Advisors Act.
Security - A term used to describe a broad range of investment instruments, including stocks and bonds, mutual funds, options, and municipal bonds.
Stock - 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.
Strategic Planning - Planning which focuses on objectives and goals.
Women in Transition - Women who are facing new life challenges for example; a successful owner/manager of a rapidly growing business, an individual with a recent inheritance or recently widowed, divorced or pending divorce, married or pending marriage, diagnosed or dealing with illness.