Navigating Acronyms In The Investment WorldSubmitted by Castlebar Asset Management on October 28th, 2012
There are a lot of acronyms that people who want to manage your investments have after their names. Making sense of this can be confusing for even veteran like myself. At least once a month I get an email with some new 3 or 4 letter acronym that has me saying “Wow, that’s a new one”. The Wall Street Journal had an article that helped clear up what a few of the more common (and higher quality, in my opinion) acronyms you should look for when hiring someone to provide you with financial advice.
Castlebar is a Registered Investment Advisor (RIA) and here is what the Journal had to say about RIAs:
This is an advisory firm that has registered with the Securities and Exchange Commission or state securities regulators. The investment adviser representatives who work at these firms may or may not have one of the specialized credentials listed below. Unlike brokers, who generally are paid a commission on the securities they sell, investment advisers typically charge a flat rate or asset-based fee and are bound by a fiduciary duty, meaning they must put clients’ interests first when giving advice. Brokers are required only to ensure that their investment recommendations are suitable for the client, based on factors such as age and risk tolerance.
“It’s not considered quite as high a standard,” says William G. Droms, a professor of finance at the McDonough School of Business at Georgetown University.
Brokers must register with and are overseen by the Financial Industry Regulatory Authority, or Finra, which is Wall Street’s self-regulator.
I am also a CFA Charterholder. This certification was the toughest thing I have had to earn in my professional career. I takes a minimum of 3 years to pass each test level spending between 250 and 300 hours on each exam in order to pass.
This pro is an investment specialist, trained to value stocks, bonds and alternative investments and build portfolios. This certification requires work experience, extensive study and the passage of three exams.
While some brokers are CFAs, the designation is more likely to be held by advisers who provide wealth-management services to high net-worth clients, as they typically have complicated portfolios in need of this kind of expertise.
Tom Robinson, managing director of education at the CFA Institute, says the issuing body recommends, but doesn’t require, that advisers spend 20 hours a year on continuing education. CFAs must annually attest that they have adhered to a code of ethics that includes putting clients’ interests first.
A full link to this article can be found here.