Definition of Investment Planning
Investment Planning is the process of identifying and implementing effective investment strategies to create and accumulate the financial resources for achieving financial planning goals.
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Types of Investment Planning Services
You may provide one or more types of investment services, each of which involves different levels of expertise, business structures, liability exposure, and regulatory issues. Some of the more common types of investment planning services include:
· Advising about investment strategies
· Providing asset allocation advice
· Recommending specific investments
· Providing investments as a broker/dealer representative
· Monitoring and reporting on investment performance
· Managing invested assets
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Compensation Issues
In providing investment planning services, you will face more choices about the way you are compensated for your services. The two broad categories of compensation are:
· Fees, which are paid directly by your client and not due to the purchase or sale of an investment product. This may include hourly, fixed or flat fees; percentage fees; performance-based fees; and contingent fees.
· Commissions and other third-party compensation, which are paid by someone other than your client and are due to the purchase or sale of a financial product.
In choosing among compensation options, you should consider both legal and regulatory issues as well as the market in which you practice. Full disclosure of the method is required if you accept commissions and recommended in all cases to provide useful information to your clients.
Find out more about compensation issues when providing investment planning services.
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Registration as an Investment Adviser
Depending on the level of investment advisory services you provide you may be required to register as an investment adviser (IA) under federal or state securities laws. Generally, you may be considered an IA, and subject to either federal or state registration, if you:
· Provide advice or issue reports or analyses about securities (provide investment advice);
· Are in the business of providing these services; and
· Provide these services for compensation
Once you have made the determination that you must register as an IA, you must then make the further determination of whether you must register federally, with the SEC, or with the state agency in the state or states where you provide investment advisory services.
Federal and many state securities laws provide an accountants’ exclusion from registration, provided the performance of the investment advisory services is solely incidental to the practice of your profession. Whether you can take advantage of this exclusion depends greatly on the other professional services you provide. The test is a facts and circumstances one and is best discussed with legal counsel.
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Professional Liability Insurance
Professional liability insurance coverage is a consideration when deciding the level of investment planning and implementation services to provide. Many professional liability policies covering CPA services exclude coverage for investment planning services that include recommendations of specific securities. Others exclude coverage of investment planning services if the CPA is registered as an investment adviser. You should review your liability coverage to determine whether all your current or anticipated services are covered.
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Relationship to Other Personal Financial Planning Areas
Investment planning is an integral part of virtually all personal financial planning strategies. The ability to create the financial resources that are necessary to meet financial goals requires the accumulation of assets. For example, investment planning is necessary to:
· Pay for one or more specific financial objectives in the future (retirement, major purchases, education)
· Create an estate; or
· Maintain a desired lifestyle.
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