NOT ALL FINANCIAL ADVISERS ARE CREATED EQUAL

Here’s a thought for the holidays that could help you emerge from a season of spending with confidence that your personal balance sheet can recover after all the celebrations have ended. It’s a nuance associated with financial planning that has the potential to make a significant difference in what you pay to invest and maybe get you back on track financially when January arrives.

Plenty of financial professionals can offer you mutual funds, which are a basket of various securities, but these funds do not always represent the most efficient way to invest. Consider the fees. Some charge 1, maybe 2 percent or more. There’s another basket of securities you can acquire that can cost as little as a half-apercent. Maybe you’ve heard of exchange traded funds, also known as ETFs. Imagine how much the reduced cost could represent, compounded over a 10-to-20year time horizon, but your adviser cannot offer ETFs without a series 7 license.

If you work with a financial professional, consider asking if he or she has a series 7. It enables financial advisers to offer ETFs, individual stocks and other securities that could benefit you.

So why don’t they all have the series 7? It might be the exam. It’s a three-hour and 45-minute test, with 125 questions, asking an array of details about all things related to stocks, bonds and other securities. It’s a pain, but it is widely considered to give financial professionals the highest level of securities authorization possible, including — among other things — the ability to increase portfolio through stock transactions. This can get a tad technical, but imagine that you’re interested in a stock that sells for $100 a share, and you’d rather buy it at $90. One approach is to sell a stock option to make the purchase at $90 a share. You can then collect capital for sale, then see if the stock falls to your price. If not, you collect the money and can repeat the process until the stock hits the price you want. There are many iterations of this concept, and it requires great care to do it properly, the point being that it’s impossible for your financial adviser to buy and sell stock options without the series 7.

One other thought about securities that enable you to invest in real estate: Perhaps you’ve head of real estate investment trusts, commonly called REITs. There are some that are fully regulated, but not listed on common exchanges, such as the S&P 500 or NASDAQ. They’re not subject to fluctuations associated with securities that are listed and some offer investors dividends in the 4 percent to 5 percent range.

Your adviser cannot offer them to you without a series 7. All of this is to say that it may be worth it to know a bit about this aspect of the investment world. A wellinformed question directed to your financial professional about the series 7 could be advantageous — and telling about the recommendations you’re receiving and the ones that you’re not.

There’s a nuance associated with financial planning that could make a significant difference in what you pay to invest and maybe get you back on track financially when January arrives.