I just reread an old article in a small magazine called Hounds and Hunting. The author is a dear friend, the Rev. Bob Ford. He wrote an article about the terms used by Beaglers and their secret meanings.
I called him, laughing hysterically: “Rev, you just exposed some trade secrets!” Rev replied: “When are you going to write about industry jargon in The Finance Hound?” At Rev’s request, let’s explore the hidden meaning of financial advisor lingo and how you can potentially avoid some costly mistakes!
• Guarantee: As we have experienced with the recent trade discussions and tariff implementation, the stock market is volatile. Investment advisors are precluded from guaranteeing investment returns. If an advisor is guaranteeing a return, they are likely offering an insurance policy. This could be an indexed annuity or a life insurance policy. In this situation, ask clarifying questions about the product so you fully understand what you are buying. Do not sign anything until you have all your questions answered in writing.
• “A Share,” “B Share” & “C Share”: You may also see this referenced as a load instead of a share. The share class indicates the type of compensation an advisor receives for selling a mutual fund. “A Shares” are up-front loads, aka commissions, received by an advisor. A Shares typically do not exceed 5.75%. “B Shares” are back-end loads or deferred commissions received upon selling the mutual fund. “C Shares” are level loads or ongoing commissions for as long as you own the investment. Understanding the advisor compensation structure can help you grasp the motive behind the recommendations. I find it extremely helpful to get the fees in writing.
- Living Benefits: Living benefits often refer to additional riders associated with an insurance policy. These can range from income guarantees to riders such as the long-term care rider and the accelerated death benefit rider. These riders can provide increased benefits and flexibilities but be sure to understand the pros and cons. Request, in writing, the impacts on premiums and death benefits. For example, certain long-term care riders can significantly increase premiums, and using the benefits can decrease death benefits to beneficiaries.
Industry Terminology
While I typically handle our home maintenance and repairs, there are times when I call a contractor. Life gets too busy, and the repair needs to be completed yesterday. Recently, I was consulting with an HVAC technician, and I was struggling to understand what he was referencing. I was unfamiliar with the terminology. It can be hard to admit you don’t know what they’re referring to, but I’m very happy that I asked for clarification. If I hadn’t asked for clarification, I likely wouldn’t have been happy with the installation.
When in doubt, ask for clarification in writing and seek a second opinion from a trusted contact, such as another advisor, an attorney or an accountant.
Bryson Roof, CFP, is a financial advisor at Fort Pitt Capital Group in Harrisburg. Fort Pitt is a division of Kovitz Investment Group Partners, LLC, a registered investment adviser with the Securities and Exchange Commission. SEC registration does not constitute an endorsement of the firm by the commission, nor does it indicate that the adviser has attained a particular level of skill or ability.
