Financial Planning Jargon Decoder


This seems silly, but “e or o” is a really important distinction.  Adviser with an “e” means a Registered Investment Adviser (RIA), a firm registered through the SEC or the state and subject to the under the Advisers Act of 1940.  Advisor with an “o” can be used by anyone — an insurance agent selling annuities or a stock broker selling stocks — anyone who wants to make themselves sound like they offer comprehensive professional services.

Why it matters: Advisers are held to a strict fiduciary standard, meaning they must always place their client’s best interests first — before their own or their employer’s interests.  Sadly, anybody — anybody — can call themselves an advisor with an “o”. We are EVOadvisers (with an “e”) because we are not one of those sales oriented firms calling themselves advisors but can’t legally call themselves advisers.  For what it’s worth, though, only firms registered with their state or the SEC as Registered Investment Advisers may use the term Adviser. Confusing right? You are not alone.  Cynics would suggest that the confusion is intentional by people who may not want the best for you at all times..

Agent/insurance agent​:
An individual who has passed a state insurance licensing exam and is appointed by insurance company(ies) to act as their agent in sales transactions. Many insurance agents are registered representatives, allowing them to sell mutual funds, annuities, life insurance, and other insurance products.

Why it matters: Working with an insurance agent who is highly knowledgeable and ethical is very important when shopping for appropriate insurance coverage.  A good insurance agent can help you obtain the protection you need (home, auto, liability, life, disability and more). It is important to ask if they are independent agent who can shop across multiple insurance companies or “captive”, meaning they can only show you products from one insurance company.  It is important to know that they all act as agents of the insurance company and their primary duty is to that company.

Assets under management/AUM​:
How Fee-Only advisors traditionally calculate the fee clients pay (one percent of assets managed up to $1 million, then lower percentages for higher amounts). Also may be used by Fee-and-Commission “dually registered” advisors when they are charging a fee.

Why it matters:  Since many firms calculate their fees based on the assets they manage, it’s important to know if your fee will fluctuate as your portfolio value changes, or if the fee is a steady dollar amount all year.


A registered representative of a broker-dealer who sells securities to consumers on behalf of an employer in exchange for a sales commission. A broker has employee-employer (W2 employee or 1099 contractor) duty of loyalty and must meet a suitability standard when selling/recommending products to clients. A broker must pass a sales examination administered by the Financial Industry Regulatory Authority (FINRA)​ in order to sell certain products (Series 7 = general securities; Series 6 = mutual funds and annuities). EVOadvisers are not brokers, we never sell products or make commissions.

Why it matters:  Stock brokers play an important role in the functioning of markets. Decades ago, they had access to the information and trading systems consumers needed if they wanted to buy and sell stocks, bonds and mutual funds.  Today, a broker may still be right for some investors, but it is important to know that their compensation is generally transaction-based (commissions on the products they sell).


CFP® and CERTIFIED FINANCIAL PLANNER ™ professional​ ​or certificant​:
Marks  conferred by the CFP Board of Standards to financial planners who meet rigorous education, experience, exam, and continuing education requirements in the financial services profession.  CFP® Professionals are rigorously trained in 72 areas of financial expertise and must accrue thousands of hours of experience prior to earning their certification.

Why it matters:  All professions have a gold standard for education, experience, examination and ethics.  The CFP Board grants the CFP® marks only to those who have stepped up to meet these rigorous standards.  There’s a veritable alphabet soup of three letter acronyms in the financial advice space — many can be earned in a weekend.  It takes years to meet the CFP Board requirements and an ongoing commitment to work under the fiduciary standard while completing at least 30 hours of CFP Board-approved ongoing education every two years.

CFP Board​:
A non-profit organization that represents the public and fosters professional standards in personal financial planning by setting and enforcing education, examination, experience, ethics, and other requirements for CFP® certification.

Commission/sales commission​:
The compensation  an agent or registered representative charges  when selling a product. EVOadvisers chooses not to sell products and does not receive sales commissions.


Dually registered​:
A registered representative who’s also an investment adviser representative. It allows the investment adviser to “switch hats” (and get paid commissions and charge fees) between the suitability standard of brokers and the fiduciary duty of investment advisers.

Why it matters:  This is an arrangement known as “hat switching” in the profession.  For a portion of the client engagement, the advisor is acting under a fiduciary standard to do solely what is in the best interest of the client, and another portion may be acting under a much lower suitability standard.  We call this being a “part time Fiduciary”. It’s a buyer beware situation in which the client would be well advised to know if their advisor is making a recommendation as a fiduciary, or has switched their hat to a sales suitability standard and is receiving compensation from the products they recommend..


“Fee based”/fee and commission​:
A compensation model in which the advisor is paid by the client and also other sources, such as product sales commissions. The term “Fee-Based’ is a misleading term that refers to “financial planners and advisors” who are both “stock brokers” who sell products (like annuities) for commissions and also offer investment advice for a fee. There is a completely different standard of care with these two structures.

Why it matters:  Fee-Only ≠Fee-based! Oh, marketing.  Don’t you just love it.  Back in the 1980’s, a small group of advisors started NAPFA and launched the Fee-Only movement: no commissions, and always deliver services under the Fiduciary standard.  It really took off, so much so that Wall Street took notice and came up with the term “fee-based” probably to confuse everyone and slow this momentum towards Fee-Only advisors.  CFP® Professionals may not use the term “fee based”..

A method of compensation in which the financial advisor is paid hourly, as a percentage of assets (AUM), or flat-fee. This is intellectual property trademarked by NAPFA and rigorously defended. Fee-Only advisors may recommend investment and insurance products; however, they do not accept commissions on the sale of these or any products. See “fee based”/fee and commission.

Why it matters:  This is a compensation method that’s transparent, and removes a big conflict of interest: payments from third parties to the advisor to make recommendations to their clients.

A very simple, very old legal duty “to do solely what is in the best interest of another.” Codified in U.S. case law for over 200 years, this standard is applied to lawyers, trustees, executors of estates, boards of directors, pension and retirement plan administrators, and registered investment advisers and their representatives. May refer to the duty or to the individual.

Why it matters:  We wonder all the time why anyone would be comfortable working with an advisor who wouldn’t confirm in writing that they are fiduciary and thus only working in the client’s interest and nobody else?

Financial planner​:
There is no legal definition or consumer protection in place for this term.  Virtually anyone may call themselves a financial planner. Unfortunately, the industry is rife with people with no training or certifications who call themselves “financial planners,” but who are actually “salespeople” and “wheeler-dealers” who take fat commissions by selling insurance and other financial products that may not be in your best interest.

Why it matters: See CFP® Professional.  If your financial planner isn’t a CFP® Professional , you may want to keep looking for a financial planner who has met these rigorous standards.

Financial planning​:
A process that incorporates aspects of a person’s life, resulting in a recommended course of action designed to achieve desired outcome(s). CFP® Professionals adhere to Practice Standards which include a rigorous academically based process to follow when providing financial planning services to their clients.

The Financial Industry Regulatory Authority is a private, self-regulating organization with the stated mission of helping ensure the fair and honest operation of the broker-dealer industry.

Why it matters:   This is the self-regulatory body composed of broker dealers (like Wells Fargo, Goldman Sachs, and Merrill Lynch) who are charged with regulating their member firms and their representatives.  Interesting to note that until about a dozen years ago this organization was NASD, the National Association of Securities Dealers. They’re still the same organization, but the new name sure makes them sound like they have a broader mandate to regulate the whole financial industry — they do not, as the SEC and states regulate Registered Investment Advisers.


Hat switching​:
See dual registered/duality registered. A broker who is also a financial advisor. The individual will “hat switch” between getting paid a fee as an investment adviser and earning commissions selling insurance and other products. This is something EVOadvisers will never do because of the inherent conflict of interest in “hat switching”.


IPS/investment policy statement​:
A document all clients of RIA firms receive that outlines how and why the portfolio is managed.

Why it matters: This is the important documented understanding of how your adviser will manage your portfolio for you.  While it is not a contract, it states your objectives, and how you will be comfortable having your investments managed.  Without such a clear written agreement , how could you be comfortable your advisor is managing your investments appropriately?


National Association of Personal Financial Advisors is the leading professional  association of Fee-Only Advisors. E​ach advisor must sign and renew a ​Fiduciary Oath every two years and subscribe to NAPFA’s ​Code of Ethics.

Why it matters:  The National Association of Personal Financial Advisors is the country’s leading professional association of Fee-Only financial advisors. As fiduciaries we commit to working in the best interests of those we serve. We never muddle our relationships with sales commissions or other potential conflicts of interest. This means our interests are aligned squarely with yours. There’s no better foundation for building your own very unique, financial future.
Dave O’Brien is the Chair-Elect of NAPFA, as an extension of his career long battle advocating for higher ethical and regulatory standards from those who give consumers financial advice.
Only about 1% of those holding themselves out as financial advisors have taken the extra steps needed to become NAPFA-Registered Financial Advisors.  NAPFA insists that every NAPFA-Registered Financial Advisor meet the highest competency standards:

  • Meet stiff credentialing and educational requirements
  • Be primarily engaged as holistic financial advisors (rather than merely investment or tax advisors)
  • Meet the most rigorous continuing education requirements in the industry
  • Submit to outside professional review, to ensure that they do not have the conflicts of interest that commissions bring
  • Submit a financial plan for review by peers before they can be admitted


Products and strategies​:

  • equity: Stocks.  When you own a stock, you have equity ownership in the company that issued the stock.
  • securities: Stocks and bonds, mutual funds, ETFs
  • exchange traded fund (ETF): Like a mutual fund, but trades throughout the day, like a stock
  • mutual fund: A bundle of stocks or bonds within a portfolio in which each investor buys into mutually.  When you buy a mutual fund share, you own a slice of a layer cake in which each layer is a stock or bond.
  • fixed income: Bonds and cash. When you own a bond, you are a lender to the company or government entity that issued the bond. You are paid interest each year (generally twice per year) and receive the bond price (generally $100 per bond) at the end of the term.
  • annuity: An insurance product in which the client puts money in, in order to receive a  certain amount back in the form of regular, predictable payments. Annuities are sold by insurance companies and lock up funds in case of long life.  They can be extremely complex insurance contracts and come in many varieties — from fixed annuities paying a set percentage of return to variable annuities which can offer many “riders” that promise to enhance the experience for the policyholder.  Annuities often pay high commissions to the people who sell them, and while they can be appropriate in certain situations, but are not always in the best interest of the client.
  • passively managed: An investment strategy that does not attempt to buy or sell in anticipation of future events in the market.
  • tactically managed: An investment strategy that falls somewhere between actively  managed and passively managed
  • actively managed: A management strategy based on the premise of “beating the  market” that involves shifting the percentage of assets as market forces change.  This can result in a lot of buying and selling based on predictions about the future.  “What stocks to buy now” headlines are examples of active management approaches.


RIA: Registered Investment Adviser.
A firm registered under the Advisers Act of 1940 through the SEC or the state and subject to the under the Advisers Act of 1940.

Registered representative​: See broker.  


Stockbroker​: See broker.

A standard of conduct overseen and enforced by the Financial Regulatory Authority (FINRA), many states and the SEC for registered representatives. It states that financial advisors and broker-dealers must make recommendations that are in the best  interest of the client. Other than scams, no investment is inherently suitable or unsuitable. Not the same as fiduciary duty.


Wealth manager​:
There is no legal definition or consumer protection in place for this term. Anyone may call themselves a wealth manager.

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