Advanced Wealth Management Terminology

1099-B

A tax form reporting gains and losses from selling investments in a brokerage account.

1099-DIV

A tax form reporting dividends and distributions received from stocks, mutual funds, or similar investments.

Actual cash value

The value of damaged or stolen property right before the loss, often after depreciation.

Admitted company

An insurance company authorized to do business in a specific state.

Adjustable rate mortgage

A mortgage with an interest rate that can change over time based on market conditions.

Affinity fraud

An investment scam that targets members of a shared group, such as a church, ethnic community, or professional group.

Alternative investment

An investment outside traditional stocks, bonds, and cash, such as private equity, hedge funds, commodities, or real estate.

Alternative minimum tax

A parallel tax system that limits certain deductions and tax benefits for some taxpayers.

Amortization

The gradual repayment of debt through scheduled payments of principal and interest.

Amortization schedule

A table showing each loan payment's principal, interest, and remaining balance.

Annual percentage rate

The yearly cost of borrowing, including interest and certain fees.

Annualized return

The average yearly gain or loss of an investment over a period of time, including compounding.

Appraisal fee

A charge paid to estimate the value of property.

Arbitration

A dispute-resolution process where a neutral third party makes a binding decision outside court.

Bailee

A person or business temporarily holding property that belongs to someone else.

Balloon payment

A large final payment due at the end of a loan.

Bankruptcy

A legal process for people or organizations unable to repay debts.

Bankruptcy protection

Legal protection that temporarily stops collection activity after a bankruptcy filing.

Basis point

One-hundredth of one percent; commonly used to describe interest rate or yield changes.

Binder

Temporary insurance coverage until the full policy is issued.

Bodily injury

Physical injury to a person, often covered under liability insurance.

Bond ladder

A portfolio of bonds with different maturity dates, designed to manage interest-rate risk and provide staggered cash flow.

Bond premium

When a bond trades above its face value.

Broker

A person or firm that acts as an intermediary to buy or sell securities for clients.

Broker-dealer

A firm that can buy and sell securities for customers and also for its own account.

Buying power

The amount available in an account to purchase securities, especially in a margin account.

Capital

Wealth in the form of money or other assets.

Capital gains tax

Tax owed on investment profits when an asset is sold for a gain.

Cash management account

An account that combines features of brokerage, checking, and savings accounts for spending, saving, and managing cash.

Catastrophe model

A computer model insurers use to estimate potential losses from disasters.

Certified check

A check guaranteed by the bank, with funds set aside or withdrawn when certified.

Chapter 7 bankruptcy

A bankruptcy process involving liquidation of assets to pay creditors.

Chapter 11 bankruptcy

A bankruptcy process allowing a business to reorganize while continuing operations.

Chapter 13 bankruptcy

A bankruptcy process allowing individuals with income to repay debts over time.

Check clearing

The process of moving funds from the bank on which a check is drawn to the bank where it is deposited.

Churning

Excessive trading by a broker to generate commissions rather than benefit the client.

Claimant

A person or party seeking payment or recovery under an insurance claim.

Co-signer

A person who agrees to repay a loan if the primary borrower does not.

Collision coverage

Auto insurance that pays for damage from a collision with another car or object.

Commission

A fee paid to a broker or firm for executing a transaction or selling a product.

Common stock

Ownership shares in a company, usually with voting rights and potential dividends.

Comprehensive auto coverage

Auto insurance for non-collision damage such as theft, fire, vandalism, or weather.

Consumer Price Index

A measure of average price changes for a basket of goods and services; commonly used to track inflation.

Correlation

A measure of how closely two investments move in relation to each other.

Cost basis

The original amount paid for an investment, used to calculate taxable gain or loss.

Credit rating

An estimate of a person's or business's ability to repay borrowed money.

Credit scoring system

A statistical system that assigns a score based on creditworthiness factors.

Creditworthiness

A lender's assessment of a borrower's ability and willingness to repay debt.

Cryptocurrency

A digital asset secured by cryptography and recorded on a decentralized ledger such as a blockchain.

Custodial account

An account controlled by an adult for the benefit of a minor until the minor reaches the age of majority.

Debt service

The amount needed to repay principal and interest on debt over a period.

Decline

When an insurer refuses to provide requested coverage.

Deductible contribution

A contribution that may reduce taxable income in the year it is made.

Deferment

A temporary pause or reduction in federal student loan payments, often without interest responsibility for certain loans.

Delinquency

Being late or overdue on a debt payment before the loan reaches default.

Direct consolidation loan

A federal student loan that combines multiple federal education loans into one loan.

Dodd-Frank Act

A federal law passed after the 2008 financial crisis to strengthen financial regulation and consumer protection.

Dow Jones Industrial Average

A stock market index tracking 30 major U.S. companies.

Earnings per share

Company profit divided by the number of outstanding shares.

Earnings season

The period when public companies report quarterly financial results.

EBITDA

Earnings before interest, taxes, depreciation, and amortization; a measure of operating performance.

Effective date

The date when an insurance policy, bond, or contract begins.

Effective rate

The actual annual rate earned or paid after accounting for compounding.

Endorsement

An amendment to an insurance policy that adds, changes, or removes coverage.

Equity compensation

Compensation paid in company stock or stock-linked awards, such as stock options or RSUs.

Equity security

An ownership interest in a company, usually common stock.

Escrow

A third-party arrangement where money or documents are held until contract conditions are met.

ESG

Environmental, social, and governance factors used to evaluate a company's sustainability and ethical practices.

Ex-dividend date

The date on or after which a stock buyer no longer receives the next declared dividend.

Exercise

Using an option right to buy or sell the underlying security at the set price.

Exercise price

The price at which an option holder can buy or sell the underlying security; also called strike price.

Face amount

The amount paid to a life insurance beneficiary when the insured dies.

FAFSA

The Free Application for Federal Student Aid used to apply for college financial aid.

Fair market value

The price a willing buyer and seller would agree on in an open market.

Federal funds rate

The overnight lending rate between banks, heavily influenced by Federal Reserve policy.

Federal work-study

A federal program providing part-time jobs to students with financial need.

Fidelity bond

Insurance protection against financial loss caused by dishonest employee acts.

Finance charge

The cost of using credit, including interest or fees.

Financial fraud

Gaining money or financial benefits through deception or false statements.

Financial guarantee insurance

Insurance or a surety arrangement that pays when a covered financial loss occurs.

FOMC

The Federal Open Market Committee, which helps set U.S. monetary policy and interest-rate targets.

Forbearance

A temporary pause or reduction in loan payments where interest usually continues to accrue.

Foreclosure

A legal process where a lender takes and sells collateral, usually property, to recover unpaid debt.

Fundamental analysis

Studying a company's financials, management, industry, and economy to estimate investment value.

Futures contract

An agreement to buy or sell an asset at a set price on a future date.

Graduated payment

A repayment plan where payments start lower and increase over time.

Greeks

Options risk measures such as delta, gamma, theta, vega, and rho.

Guaranteed insurability

A life insurance option allowing future additional coverage without new proof of insurability.

Hedge

An investment position used to reduce risk from another position.

High-deductible health plan

A health insurance plan with higher deductibles that may qualify the owner to contribute to an HSA.

Holding period

The length of time an investment is held, often important for tax treatment.

Incentive stock option

A tax-advantaged employee stock option that may qualify for long-term capital gains treatment if holding rules are met.

Income driven payment

A student-loan repayment plan based on income and family size.

Income limit

An IRS income threshold that can affect eligibility for certain account contributions or tax deductions.

Income statement

A financial statement showing a company's revenue, expenses, and profit or loss over a period.

Incontestable clause

A life insurance provision limiting the insurer's ability to challenge the policy after a set period.

Installment plan

A repayment plan requiring regular payments over the life of a loan.

Investment account

An account used to hold cash and investments for a specific purpose, such as retirement, education, or general investing.

Investment adviser

A person or firm that gives investment advice or manages portfolios and owes fiduciary duties to clients.

Investment vehicle

A product or account used to invest money, such as a stock, bond, mutual fund, ETF, IRA, or 529 plan.