Deciphering the alphabet soup of advisers

By Leslie Mann

Chicago Tribune (MCT)

Published: Monday, July 14 2014 12:00 a.m. MDT

The term “investment adviser” is a legal term for someone registered with the SEC (Securities and Exchange Commission) or your state securities regulator.

Though tossed about informally, the term “broker-dealer” refers to a person or company that buys/sells securities, and a “broker” is a person who buys/sells on your behalf. Technically, he is a “registered representative.” The firm may call itself “full-service” or “discount.” Using the latter is cheaper but means you do your own research.

To venture beyond vanilla stocks and bonds, consult a CAIA (chartered alternative investment analyst).

Beyond planning. A CPA or an EA (enrolled agent) can help you file your taxes, but many EAs specialize in resolving disputes with the IRS. A CMA (certified management accountant) focuses more on business analyses than taxes.

You don’t have to be rich to benefit from trusts and estate planning, which call for the addition of a lawyer, whose initials may include JD (Juris Doctor) or LLM (Master of Laws degree). The latter gives him international credibility. If you’re an entrepreneur with a new business plan, you may consult an MBA (Master of Business Administration).

Even if you understand the basics of home, health and auto insurance, your financial plan may call for trickier insurance products such as annuities, life insurance, disability income or long-term-care insurance. The CLU acronym is the gold standard here.

Look behind the curtain. The number of initials after a professional’s name does not necessarily mean he is better than the next one. In a rural area, he may be a jack-of-all-trades. In an urban area, he’s more likely to be part of a larger firm, where you meet with different people as your life transitions.

If in doubt, track the initials back to the groups that bestow them and keep track of which ones have gone Bernard Madoff. Many come from the College for Financial Planning, but sources also include colleges and government entities. Some blur the lines, like FINRA (Financial Industry Regulatory Authority), the independent nonprofit authorized by Congress to watchdog securities firms.

Many a financial adviser offers a free initial session so you can determine if you want a long-term relationship with him. This is your money. So, regardless of his other initials, your adviser should at least earn your T-R-U-S-T.


©2014 Chicago Tribune

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