Complicated Words
There are countless words within the financial world that are unnecessarily complicated. The terms are fancy but the concepts are simple. Here’s some clarity about them and what they mean to you.
The F Word
Oh, the profanity! There are a lot of bad “F words” in finance. They are troublesome and used very often, as obscenities usually are. Some of these words are not only bad, but downright confusing.
A lot of people who work in finance (“FI-nance” or “Feye – nance”, depending on your disposition and pomposity) spew off these terms like it’s nothing and it can be annoying. Several readers of the newsletter have shared similar versions of this story.
“At a party, I met with a finance guy and he kept talking the entire time. I couldn’t get a word in edgewise! It was like going on a bad first date with someone who spoke a language that I didn’t understand. I couldn’t comprehend the financial vernacular. He used all sorts of annoying acronyms, numbers, and he was full of himself.”
Some words that he used are particular to finance, and they were probably words such as, fiduciary, fee only, and financial custodian. Here’s a review of these words and what they really mean for you.
“Fiduciary”
Fiduciary is a term that means relating to or involving trust, such as the trust between a customer and a professional. Your interests are first and come before the firm’s interest. Furthermore, a fiduciary eliminates conflicts of interest and, if they cannot be avoided, they must be disclosed.
As a fiduciary 100% of the time, I act with care, skill, prudence, and diligence that correspond with your goals, risk tolerance, objectives, and financial and personal situation. Additionally, I exercise care and good judgment in all of your matters as a fiduciary.
“Fee Only”
There is a service fee for the advice, planning, and investment strategy to meet your financial goals. It is a set rate for the services provided and it is typically a flat rate or percentage of assets fee. There are no hidden charges, no commissions, and no other forms of compensation. The only person paying the advisor is you. Fortrove is a fee only financial advisor.
“Financial Custodian”
A custodian is a word for a bank or institution that holds financial assets for your protection. They minimize the risk of theft or loss of your assets. Think of them as caretakers or concierge for your assets. The concierge sends you a monthly or quarterly statement for your account and you can log into your account whenever you’d like to check your balances. Some examples of well-known caretakers of assets are Charles Schwab, Fidelity, and TD Ameritrade. Fortrove uses Charles Schwab.
What These Words Means to You
These three words are a very small sample of the many finance terms that are baffling and downright overwhelming. Understanding complicated finance lingo and what it means to you will help you feel more prepared to take hold of your financial situation.