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Learn Your ABCs Before Hiring A Financial Advisor

Morningstar Investment Research

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June 07, 2013 - 2013 Learn Your ABCs Before Hiring a Financial Advisor - by Morningstar Investment Research

In shopping around for a financial advisor, I often see acronyms such as CFA or CFP after their names. What do these stand for and how do I know which are most important?

Seeking the help of a financial advisor can, at times, feel like wading through a bowl of alphabet soup, said Morningstar assistant site editor Adam Zoll. The list of acronyms that advisors typically attach to their names on websites and business cards may mean little to those unfamiliar with them. But if you're going to turn to a financial professional for help, you'll need to decode this series of lett ers to find an advisor that's a good match for your needs. Before focusing on what specific acronyms mean, however, you'll need to keep in mind a few basics.

Why You May Not Be Able to Max Out Your 401(k)

"Say what?" That was Morningstar director of personal finance Christine Benz's response when a friend recently told her that she had a portion of her 2012 401(k) contribution refunded back to her in March of this year. How could that happen? Maxing out a 401(k) is an article of faith for many higher-income workers. Unlike traditional deductible and Roth IRAs, where income limits may curb contributions, employees can generally contribute the maximum allowable amount to their 401(k)s regardless of how much they earn. But so-called nondiscrimination testing may limit the 401(k) contributions of highly paid workers, especially if they hail from smaller companies with a lot of executives and not many rank-and-file employees. If a company's 401(k) plan fails the nondiscrimination tests, those workers who are classified as highly compensated employees, or HCEs, may not be able to make the maximum allowable contribution. Click here to read more.

Among the other topics we addressed this week:

Morningstar's Guide to Free ETF Trading. We look for the best of the bunch among commission-free trading programs for exchange-traded funds.

New Managers Who Are Enthusiastic Buyers of Their Own Funds. Some managers quickly invest more than $1 million in their funds, should you follow their lead?

Arrowpoint Partners Buys Aster Investment Management. Plus, Vanguard launches international-bond fund, FPA Crescent picks up 2 new comanagers, and managers depart at GSAM, Buffalo, and BlackRock. Also, Matthews to close its Asia dividend fund, and Morgan Stanley set to launch a global quality stock fund.

3 Promising Diversified Emerging-Markets Funds. These young funds have a lot going for them.

For Closed-End Funds, Cheaper Isn't Necessarily Better. When it comes to expenses, leveraged CEFs are quite different from open-end mutual funds.

5 Reasons to Let a Sleeping 401(k) Lie. Unique investment options and legal protections may make staying put better than rolling over.

Novo Nordisk Has One of the Widest Moats in Health Care. Morningstar's Matt Coffina explains why he recently purchased Novo Nordisk for StockInvestor's real-money Hare portfolio.

State Street Launches TIPS, Global Dividend ETFs. Plus, yet another hedged junk-bond ETF comes to market, VIG's fee falls further, ProShares announces 7 ETF share splits and 8 reverse splits, and First Trust to renovate its strategic value ETF.

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