ChFC key terms

A legal obligation to act in the client's best interest, placing the client's interests ahead of the adviser's own and disclosing conflicts of interest.

A written agreement that defines the scope of services, fees, responsibilities of both planner and client, and the time frame before planning work begins.

Non-numeric information about a client, such as goals, attitudes toward risk, health, family circumstances, and values, gathered during the data-collection step of the planning process.

A snapshot listing what a client owns (assets) and owes (liabilities) on a given date; the difference is net worth and shows financial position.

The value of the next-best alternative given up when a resource, such as money or time, is committed to one use rather than another.

A financial or emotional stake in a person or property such that loss or damage would cause genuine hardship, required at policy inception to make insurance valid.

The tendency of people with higher-than-average risk to seek insurance more actively than lower-risk people, which can drive up premiums unless insurers underwrite and price for it.

A property insurance provision requiring the insured to carry coverage equal to a stated percentage of the property's value or face a reduced claim payment.

The increased chance of loss caused by an insured's behavior after coverage is purchased, since insurance can reduce the incentive to protect the insured property or health.

The savings component inside permanent life insurance that accumulates over time and can be borrowed against, withdrawn, or paid out on surrender.

The rate applied to the next dollar of taxable income; it is generally higher than the effective rate and is useful for evaluating the tax effect of additional income or deductions.

Total tax paid divided by total taxable income (or gross income), showing the average share of income consumed by tax rather than the rate on the last dollar.

A dollar-for-dollar reduction of tax owed, making it more valuable than an equal-sized deduction, which only reduces the income subject to tax.

Gross income minus certain above-the-line adjustments such as retirement plan contributions and self-employed health insurance; it is the starting point for many deductions and phase-outs.

A rule disallowing a loss on a security sold at a loss when a substantially identical security is bought within 30 days before or after the sale.

The doctrine that income is taxable when it is made available to a taxpayer without restriction, even if the taxpayer chooses not to take it yet.

The process by which an employee gains nonforfeitable ownership of employer contributions and their earnings in a retirement plan, usually according to a schedule.

The minimum amount that must be withdrawn annually from most tax-deferred retirement accounts after a certain age, with shortfalls subject to a penalty tax.

A retirement plan in which the employer contributes a specified amount to each participant's individual account, and the retirement benefit depends on contributions plus investment results.

The age at which a worker becomes eligible for unreduced Social Security retirement benefits, determined by birth year and ranging from 66 to 67.

A contract purchased with a lump sum that begins paying income almost immediately, often used to convert savings into a guaranteed lifetime stream.

A measure of a security's or portfolio's sensitivity to moves in the broad market; a beta above one suggests greater volatility than the market.

A statistical measure of how widely returns vary around their average, commonly used as a proxy for total investment risk; larger values indicate more variability.

A risk-adjusted performance measure that divides excess return over the risk-free rate by standard deviation, indicating return earned per unit of total volatility.

A measure of a bond's price sensitivity to interest rate changes, expressed in years; longer duration means greater price movement when rates shift.

The division of a portfolio among asset classes such as stocks, bonds, and cash, which is a primary driver of long-run return and volatility.

The theory that security prices quickly reflect available information, making it difficult to earn consistent excess returns through analysis or trading.

The total value of all property in which a decedent held an interest at death, computed before deductions, and the starting point for federal estate tax.

The ability of a surviving spouse to use the deceased spouse's unused estate and gift tax exclusion amount, subject to a timely filed election.

The rule that inherited property generally takes a basis equal to its fair market value at the owner's death, potentially eliminating income tax on prior appreciation.

An estate and gift tax deduction for property passing to a surviving spouse in a qualifying form, allowing unlimited transfers between spouses without tax.

Dying without a valid will, so that state law determines who receives the estate and in what shares, often overriding the decedent's wishes.

A trust whose creator retains specified powers or interests, causing the trust's income to be taxed to the creator rather than to the trust or beneficiaries.

Client objectives ranked by importance, urgency, and cost so that limited resources are directed first to needs and to goals with the greatest consequences if unmet.

Testing how a plan's outcomes change when key assumptions such as inflation, return, or life expectancy are varied, helping identify which risks matter most.

The ongoing step of the planning process in which the planner and client review progress, update assumptions and data, and revise recommendations as circumstances change.

A behavioral tendency to feel the pain of a loss more strongly than the pleasure of an equal gain, which can lead clients to make overly conservative or panic-driven decisions.

A conduct standard requiring recommendations to act in a retail client's best interest and to mitigate or disclose conflicts, broader than the older suitability requirement.

An automated digital platform that builds and manages investment portfolios using algorithms and low-cost funds, often with limited human interaction.

Federal legislation that changed retirement rules, including raising the RMD age, limiting stretch IRA payouts for most non-spouse beneficiaries, and expanding small-employer plan incentives.