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IAO Terminology

The purpose of this document is to provide a basic understand of words or phrases used in the IAO group on a daily basis.

1Basis Point _____RBC institutional Consulting Agreement for institutional audience (Corporations, Trusts, Endowments, Foundations, etc.
2Tax Harvesting _____A standard against which the performance of a security, mutual fund or investment manager can be measured.
3Stock _____A type of policy issued by an insurance company that allows you to save money for retirement. The money you pay in can be either a lump sum or a number of payments. These contributions then earn interest, generally tax-deferred, and after a period of time, provide you with a stream of income.
4Bond _____An account that allows a broker and/or money manager to buy and sell securities without the client's consent.
5Principal trade _____An account in which a customer purchases securities on credit extended by a broker-dealer. This is not limited to purchasing securities, but also selling short.
6Secondary Market _____An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors.
7Agency trade _____A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.
8Mutual Fund _____The average value of the underlying securities that make up a mutual fund. All managed accounts trade with NAV (No commission), and all Mutual Fund liquidations occur at NAV regardless of if the account is managed or not.
9Margin _____When a brokerage buys securities in the secondary market holds these securities for a period of time and then sells them. When an investor buys and sells stock through a brokerage firm that acts as the principal to a trade, the firm will use its own inventory on hand to fill the order for the client.
10Annuity _____The written acknowledgment provided by a broker indicating that a trade has been completed. This includes details such as the date, price, commission, fees and settlement terms of the trade.
11DVP _____Organized as a limited purpose trust company and provides safe keeping through electronic recordkeeping of securities balances. It also acts like a clearinghouse to process and settle trades in corporate and municipal securities.
12UIT _____The search for and transfer of securities between clients of different brokerages.
13UMA _____A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. It is also called aftermarket, and it is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold.
14SMA _____Selling securities at a loss to offset a capital gains tax liability. Tax gain/loss harvesting is typically used to limit the recognition of short-term capital gains, which are normally taxed at higher federal income tax rates than long-term capital gains. The branch can also sell securities to realize gains. If the client is realizing losses those securities cannot be bought back for 30 days (Wash/Sale rule); however if the client is realizing gains, those securities can be bought back the next day.
15Proxy _____Separately managed account, an individual account managed by an independent investment management firm.
16DTC _____A written authorization given by a shareholder for someone else, usually the company's management, to cast his/her vote at a shareholder meeting or at another time.
17Benchmarks _____The degree of variability in investment returns that an individual is willing to withstand.
18Discretion _____One one-hundredth of one percentage point. I.E. .01%
19Risk Tolerance _____Settlement system ensures that delivery will occur only if a payment occurs. The system acts as a link between a funds transfer system and a securities transfer system.
20RIC _____A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
21Confirm _____An investment vehicle that purchases a fixed portfolio of securities, such as corporate, municipal or government bonds, mortgage-backed securities, common stock or preferred stock. The trust expires when bonds mature or, in the case of some equity funds, at a specified future date.
22NAV _____Unified Managed Account, an individual account managed by an overlay manager that allows the client to invest in multiple vehicles, ETF’s, Mutual Funds, SMA Models etc.

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