Glossary of Financial Terms

Whether you are new to the idea of financial planning or have been working with advisors for years, the current economic climate has made it more important than ever for you to understand the specifics and the language of financial planning and investment management.

That is why Hopkins Investment Management has put together this glossary of important terms and concepts from trusted financial sources.  If you still have questions after reviewing the document, please contact Lyn Hopkins at lyn.hopkins@hopkinsim.com

Glossary of Terms
Certified Financial Planner – A financial planner is someone who works with clients to develop long-term financial goals and implement strategies to achieve those goals.  According to www.investorwords.com, 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."  The appropriate credentials are awarded by Certified Financial Planner Board of Standards inc. (CFP Board) to those who meet the proper requirements for education, examination, experience, and ethics.  They are awarded with official CFP certification.  Client needs that can be fulfilled by financial planners include but are not limited to:

• Cash flow management
• Investment management
• Income taxes
• Insurance
• Retirement
• Risk management
• College funds
• Estates and wills

Fiduciary – According to www.focusonfiduciary.com, a “financial advisor held to a fiduciary standard occupies a position of special trust and confidence when working with a client. As a fiduciary, the financial advisor is required to act with undivided loyalty to the client. This includes disclosure of how the financial advisor is to be compensated and any corresponding conflicts of interest.”

Independent Fiduciary – A financial advisor who serves as an independent fiduciary does not work for a brokerage firm or other large corporation.  This means the financial advisor holds responsibilities solely to his or her clients, not to shareholders or other entities. 

Fee-Only – When financial planners are compensated solely by a client, accepting only a fee for rendered services instead of commissions, rebates, awards, bonuses or any forms of compensation, this is called “fee-only.”  Terms of fees can be:

• Hourly rates
• Monthly or yearly flat fees
• Percentages of monies invested
• Percentages of income
• Per project basis

NAPFA – The National Association of Personal Financial Advisors is an organization consisting of financial planners who have taken a legally-binding oath to put their clients’ interests above their own.  Members are required to have been working in a financial advisory capacity for at least 36 months and to have at least three credits of higher education in the areas of income tax, investments, estate planning, retirement planning, and risk management.  Members also must receive an additional 60 hours of continuing education every two years.  According to the NAPFA website (www.napfa.org), “professionals who become NAPFA-Registered Financial Advisors are committed to the three primary ideals of NAPFA:

• The belief that clients are best served by a comprehensive approach to financial planning.
• The highest levels of competency must be achieved and maintained.
• Fee-only compensation and a fiduciary relationship are vital to placing the interests of the client above all others.”