This is part 2 of a blog post intended to grow the financial knowledge base of the children and grandchildren of my clients.  Please go back and read part one if you haven’t already.

Types of Financial Professionals

There are many kinds of financial professionals who could help you save for retirement and invest the assets you accumulate.  They each have different types of licensing from either the state or federal government depending on what they specialize in.  Click this link for a short webinar and greater detail on this topic.

A Licensed Fiduciary

A fiduciary is the only financial professional with a legal obligation that any recommendation they make must be made in the client’s best interest.  That places the fiduciary on the same side as the client with a greater emphasis on education and transparency and less about commissions that are to be earned. 

Often a fiduciary will have the title of Investment Advisor Representative(IAR).  This means they could represent multiple registered investment advisory(RIA) firms.  These are the professional portfolio managers who will do the actual management of your assets and determine which holdings best meet your stated goals.  Some utilize stocks, bonds, ETFs, mutual funds or a combination of those holdings.  The fiduciary may be paid as part of an annual fee or through a commission depending on which assets are utilized. 

Independent Advisor or Captive Advisor

An independent advisor may be a fiduciary and have access to a wider amount of investment or insurance products than a captive advisor.  A captive advisor is an employee of a large brokerage firm or bank and could be limited to only the investment or insurance products offered by the firm.  That limited product availability disallows the captive advisor from being a fiduciary because they may not have access to the types of products that best fits the client’s needs.


This is the advisor you could use to help you purchase stocks and bonds or other investments.  Stockbrokers are licensed with the federal securities and exchange commission(SEC).  They may also operate as a fiduciary with a Series 65 license.  Generally, the stockbroker is compensated through a commission.

Insurance only licensed agents

This financial professional is only licensed through the state to sell life insurance, annuities, health insurance or a variety of other lines of insurance.  This agent is not a fiduciary but can be independent or employed with a captive company. 

Buying a Home and a Mortgage

For many people, the most valuable asset they own is their home.  To purchase a home, most people need to borrow money from a bank which is called a mortgage.  You will need to qualify for a mortgage by proving your consistent income and amount of other debt you may have accumulated such as a new car or credit cards. 

Your income, debt and efforts to pay off that debt will help you establish a credit rating.  The higher your credit rating the more likely a bank will loan you money with potentially a lower interest rate.  It’s very important to be consistent in paying your bills on time and paying off credit cards as frequently as possible.  The higher your interest rate, the larger the monthly payment will be.  Having a strong or high credit rating will go a long way in life.

Interest Rates/Mortgages

Interest rates are driven by the Federal Reserve Bank of the United States.  This federal bank sets an interest rate they will use to loan money to smaller regional banks.

Once you have a mortgage, you may eventually refinance your mortgage for a lower interest rate and lower monthly payments or to get a shorter duration loan.  Most mortgages are loans with an amortization schedule that will have the mortgage paid off in 30 years, although there are shorter duration mortgages available. 

There are also strategies that can be used to pay off your mortgage sooner such as making one extra monthly payment a year.  Here’s an easy way to do that.  Lets say your monthly mortgage payment is $1200 a month.  If you just pay an extra 1/12th a month or $1300 a month you will have made one extra payment a year.  That could shorten your 30-year mortgage by 4.5 years, saving you thousands of dollars in interest payments

Life Insurance

Most people are unaware of the savings potential life insurance can bring to a young person for the future.  First let’s look at the three styles of insurance.

Term life insurance

This is non-cash accumulating life insurance.  You can buy a term policy for a variety of terms such as 10-, 15-, or 20-year terms. This means if you pass away during the term your beneficiaries will receive the death benefit tax-free.  Generally, this insurance has a low cost and can be used for a wide range of needs. 

Whole Life

This is permanent insurance which means you will have it for as long as you are making your insurance premium payments.  Cash value will accumulate in this plan that can be accessed in the future for retirement income or other needs.

Universal Life Insurance

This is also permanent insurance that accumulates cash value except the premiums you pay can be flexible.  For example, maybe you don’t want to pay premiums forever.  With universal life, you could choose to only pay premiums for a certain number of years.  When those years end your cash value will continue to grow and be accessible to fund a child’s education, a wedding, or retirement income all tax-free.

We hope your children and grandchild were able to learn from our two-part blog post, Millennial Investing 101.  I am happy to offer a no-cost consultation to discuss these topics with your family members in greater depth.  Please call our office at (480) 428-8005 or sign up with this link.

Written by Marc Montini, Financial Planner and licensed fiduciary

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