Financial Advisor Designations: Spotlight On Estate Planning Specialist

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By Cory Bowman

There are a variety of financial advisor designations out there to choose from when deciding on a program or certificate that will enhance your business practice or simply grow your personal knowledge. One financial advisor designation that can be very useful is the designation of estate planning specialist. An estate planning specialist, (someone who is Board Certified in Estate PlanningTM) understands the basics of estate planning and is well-versed in real-world examples.

For example, an estate planning specialist should be familiar with different types of shares as well as current financial news that relates to mutual funds – A, B, and C shares are the most common types of shares. In general, A or C shares result in higher returns if less than $100,000 is invested. Class A shares are the favored choice if $100,000 or more is invested. In most instances, B shares are the second best choice if less than $100,000 is invested.

During 2006, the NASD imposed more than $40 million of fines on brokerage firms for improperly selling B and C mutual fund shares. During the early part of 2007, the SEC acknowledged that one of its key arguments no longer exists; the agency had assumed A shares were always better than B shares. The NASD commission now believes that cost alone is not the only decision in making investment recommendations.

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Most of the lawsuits against brokerage firms were based on one of three things: (1) failure to tell clients that A shares can be cheaper than B shares, (2) fraud, and/or (3) suitability. In a 2007 case dropped by the SEC, the agency acknowledged that even at the $250,000 breakpoint, B shares may not be more expensive for the client than A shares. One broker, now retired, spent $400,000 in legal fees and lost $1.6 million in deferred compensation in 2001 when his broker-dealer fired him over the sale of B shares. In late 2005, a NYSE arbitration panel ordered the firm to pay the terminated broker all deferred compensation plus legal fees.

Financial Advisor Designations: Reviewing Performance

As a financial advisor, including specialists in estate planning, one must be able to look at different investment options, review performance of the options, and make investment suggestions to help clients reach their goals. Over the last few years a number of different asset categories have performed quite well and investors do have a choice, depending upon their objectives, time horizon, tax bracket, level of risk and ability to make a lump-sum or periodic payments. Some investment vehicles that an investor may have to choose from are: (1) individual securities, (2) exchange-traded funds (ETFs), (3) exchange-traded notes (ETNs), (4) enhanced appreciation notes (EANs), (5) closed-end funds (CEFs), (6) real estate investment trusts (REITs), (7) unit investment trusts (UITs), (8) annuities and/or (9) open-end mutual funds.

Courses for financial advisor designations should provide insight into how multiple investment vehicles can be used to construct a unique and effective series of diversified portfolios. Financial advisors should help their clients understand the workings of mutual funds – once the clients understand how mutual funds work, it is doubtful they will want to use anything else for the bulk of their portfolio. Mutual funds are truly one of the best investment vehicles ever created. The types of assets open-end mutual funds invest in provide the flexibility, returns and risk level that clients are generally looking for.

About the Author: Cory Bowman is Director of Ops at the Institute of Business Finance. IBF has helped thousands of members of the financial services industry attain designations. For more information about IBF, financial advisor designations, or becoming an estate planning specialist, visit http://www.icfs.com

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