Kim C. Christensen                                                              
 
Certified Financial Planner    
Registered Investment Adviser        
Registered Investment Advisor
Financial Education - What You Need to Know

PRODUCTS                           PEOPLE                           DESIGNATIONS


The financial services world has an incredible array of services and products.  It can frankly be quite overwhelming for many people who need help, but do not know the best way of getting it.  There are also many hazards and risks for the uneducated and unwary.  Life insurance rip offs and annuity rip offs are a couple of examples.

This web site will help you learn more about the products, companies, and people who provide them.  It will also point you to other resources that will help you to learn more.

PRODUCTS 

Financial products encompass two main domains:  risk and investment. 

Risk-based products are insurance and investment tools with an insurance wrapper, such as annuities.

Investment products cover a wide array of tools, too numerous to mention all in one place.  Many are also too complex to be able to describe here.  The most common investment products that most people are likely to use are securities (stocks and bonds), mutual funds, real estate, and bank products (checking, savings, certificates of deposit).

To learn more about the most common risk and investment products, follow these links:

INVESTMENTS                              INSURANCE

PEOPLE 

Financial services professionals work under several different models.  Most of the models are associated with companies who provide products, some do not.  It is important for you to understand how financial services professionals are paid, as that is where conflicts of interest are most likely to come into play.  If you are only paying for planning or advice and it is not tied in with a specific company, potential conflicts will be minimized.  If you are working with people tied to companies, the potential for conflict is greater, due to preferences for that company's products, incentives (both financial and non-financial), and benefits possibly provided by the companies.  Here are three definitions for advisor compensation models (Google: "fee only vs fee based" to learn more.)


FEE ONLY- All compensation comes directly from the client, and the advisor accepts no compensation from product providers, broker-dealers, insurance companies, etc. (Registered Investment Advisors/Investment Advisor Representatives only)

COMMISSION ONLY- All compensation comes from the product providers for the sale of their products, including insurance policies, annuities, mutual funds, etc.  (Registered Representatives/Insurance Agents)

FEE BASED - Compensation can be a combination of fees paid directly from the client and/or commissions from product providers.  (Combination RIA/IAR and Registered Representative and/or Insurance Agent (see dually-registered/hybrid advisors below.)

Registered Investment Advisors/Investment Advisor Representatives

Registered investment advisors (RIA) are companies that are regulated by either the Securities and Exchange Commission (SEC), or individual state securities boards.  They have a fiduciary obligation to do only what is in your best interest - putting the client's interests above their own.  The criteria used to determine the regulator is the amount of assets under management.  Above $100,000,000 is the SEC, below $100,000,000 are the states (except Wyoming, which does not have a state securities regulator).  Employees or advisors  associated with the registered investment advisor (company) are called investment advisor representatives (IAR).  RIA's and IAR's are held to the highest standard of accountability to their clients, and are fiduciaries, which means that everything they do must be in the best interest of their clients.   You must be qualified to be an RIA/IAR.  A few of the qualifications include being a Certified Financial Planner (CFP®),  a Chartered Financial Consultant (ChFC®), Chartered Financial Analyst® (CFA®), Personal Financial Specialists (PFS), Chartered Investment Counsel (CIC), or pass either the Series 65 or Series 66 exams, which are administered by FINRA

RIA/IAR's are often independent and do not represent any particular company, and can provide investment products from almost any provider.  However, they will usually work through a custodian, and the custodian may not have all possible investment products available.    They may also be associated with a broker dealer (see the sections below on Registered Representatives and Dually Registered/Hybrid Advisors). 

To learn more about RIA's, you can look them up through the SEC website.  There you will find their ADV Parts I and II, which are supposed to describe everything about their business, how they work, how they get paid, and if any kind of action has ever been taken against them. 

If you want to look me up, I am registered as a FIRM, and not an individual.  My firm name is Kim C. Christensen.  Here is a link to my registration information:  Kim C. Christensen

I am an independent RIA and I am only paid fees by my clients for planning or investment advice.

Registered Representatives

Registered representatives are regulated by the Financial Industry Regulatory Authority (FINRA) , a non-governmental self-regulatory organization.  Registered representatives are associated with broker/dealers, and they have passed licensing exams that allow them to sell mutual funds, variable annuities, and possibly securities.  These exams include the series 6, 7, 65 and 66.  Series 6 allows the sale of mutual funds and variable annuities, series 7 also allows those products plus securities including individual stocks and bonds.    The exams are administered by FINRA.  Registered representatives and broker/dealers have a suitability obligation to clients, making recommendations that are consistent with the best

The products that can be offered by the representative are chosen by the company they represent.  Some companies will have a wide variety of products, some will be narrower.  The representatives will be paid either commissions or fees, and may also qualify for additional compensation or incentives such as trips, software, etc.  Many broker/dealers are now also becoming registered investment advisors and their registered representatives are also becoming investments advisor representatives.  These folks are considered dually registered or hybrid.  Investment advisors in this scenario will still have products that have been approved by their RIA.

To learn more about registered representatives, you can look them up through the FINRA website.  There you will find out who they work for, their past work history, their licenses, and if any kind of action has ever been taken against them.

Dually Registered / Hybrid Advisors

Some advisors are both registered representatives of broker dealers and registered investment advisors or investment advisor representatives.  A dually registered advisor is affiliated with a broker dealer as a registered representative for them, and also as an investment advisor representative under the broker dealer's registered investment advisor.  A hybrid advisor is an independent registered investment advisor, who also is licensed by FINRA to sell products through a broker dealer.  The hybrid advisor's broker dealer does not oversee their investment advisory business, while all of the dually registered advisor's business is supervised by their broker dealer.  Confused?  Most people are, including the advisors!

Insurance Agents

Insurance agents may be "captive" or non-captive.  Captive agents are employees of an insurance company, and they may only be able to sell the products of that company.  Some captive companies allow the sale of other company's products when their products are not available or appropriate, but obviously they will usually insist that their products be presented first.  The agents get the benefit of employer-provided benefits like group health insurance, retirement plans, etc.  Some of the best products are available only through captive companies, and may only be available through a captive agent, although some captive companies broker their products through independent agents.

Non-captive agents will most likely be independent agents who work through insurance brokers.  They can sell any product available through the brokers, and they may also make their own arrangements directly with the insurance companies.  An advantage of working with a non-captive agent is a wide variety of products they can research and present.  The possible downside is a preference to present the products that pay the highest commissions, and the unavailability of what may be the best products, which are only provided by the captive companies.  (Some captive companies also broker their products through non-captive agents, some do not.)  Insurance agents are most often paid commissions on the products they sell, and may also qualify for additional compensation such as bonuses, sales contests, trips, etc. 

To learn more about insurance agents, you should be able to look them up through the state insurance commission website for the state(s) where they are licensed.  The National Association of Insurance Commissioners website has a map website that leads to all individual state insurance commission websites.  There you should be able to find out if they have an insurance license, and the companies that they are appointed to represent.  (Note that if they are not appointed for the company under discussion, it is possible that they can become appointed when an application is submitted for a client.)

Banks

Most banks now also offer financial products like mutual funds, securities, annuities and insurance.  The bank employees who provide the products are likely to be registered representatives, insurance agents, and possibly investment advisor representatives.  They are going to be limited to providing products that the banks approve, and also under pressure to cross-sell bank products and services.


FINANCIAL INDUSTRY DESIGNATIONS 

Titles alone do not necessarily mean much, or anything, in the world of financial services.  Anyone can call themselves a financial planner, financial advisor, investment advisor, etc., with no educational or regulatory requirement for minimal qualifications.  However, some titles do have requirements, such as Certified Financial Planner, Chartered Financial Analyst®, Registered Investment Advisor, etc.

On the other hand, designations can be very helpful for quickly determining the level of training and knowledge that a financial services professional has attained.  They can also be very misleading for people who are not familiar with them, and do not know what it took to get the credential. 

There are MANY other designations, too numerous to discuss here, which may or may not have required a lot of hard work and may or many not indicate a significant level of knowledge on the part of the individual.  To learn more about various designations and what it took to get them, see the FINRA designation education website.

One of the most difficult credentials to attain is the Chartered Financial Analyst® (CFA®).  It requires at a minimum two years of study, and more probably, three or more years of study, and passing three rigorous examinations.  Someone who has this credential is extremely well-trained in investments.

Another difficult designation to attain is Certified Financial Planner™ (CFP®).  It may or may not require a rigorous course of study (professionals like CPA's and attorneys are automatically qualified to sit for the exam, as well as people who have other designations such as Chartered Financial Consultant (ChFC®), Chartered Life Underwriter (CLU®), and some others.  The exam is 10 hours long over two days, extremely difficult, with a pass rate generally somewhere between 50-60%.  CFP® certificants are knowledgeable in investments, insurance, retirement, tax, and estate planning, and they are able to tie it all together into comprehensive financial plans.

Chartered Financial Consultants and Chartered Life Underwriters have taken six to nine comprehensive courses of study on a variety of topics, many insurance-related, which are always followed by a two hour examination for each course.

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