Client Classification

A tax-advantaged education savings account (Section 529 Qualified Tuition Program) offering tax-free growth for qualified education expenses at any level. Covers K-12 expenses (tuition, books, curriculum materials, tutoring and certain test fees) up to $20,000 per year, plus unlimited college expenses. Features no income limits, no age limits, changeable beneficiaries, and unique 5-year gift tax acceleration.

Example: A parent opens a 529 plan for their newborn with a $50,000 initial contribution. The account grows t...

An investor who meets SEC-defined tests (such as income, net worth or certain professional licenses), qualifying them to invest in unregistered securities like private placements. For an individual, the main tests are income over $200k ($300k joint with a spouse or spousal equivalent) in each of the two most recent years with the same expected this year, net worth over $1M alone or with a spouse or spousal equivalent (excluding the primary residence), or a Series 7, 65 or 82 license in good standing.

Example: An individual who earned $250k in each of the last two years and expects the same this year qualifie...

A brokerage account requiring full payment for all securities purchases with no borrowing allowed. Regulation T requires full payment within one payment period: the standard settlement cycle (T+1 for stocks and bonds as of May 2024) plus two business days, or T+3; a firm may require payment sooner. Because it allows no borrowing, it suits risk-averse clients who want to avoid leverage and margin interest.

Example: A 72-year-old retiree opens a cash account to avoid any risk of leverage. She buys $10,000 in divide...

The process of arranging wealth transfer strategies to minimize taxes and ensure assets pass to intended beneficiaries. Includes wills, trusts (revocable and irrevocable), powers of attorney, beneficiary designations, and gifting strategies. The estate tax basic exclusion amount is $15 million per individual for 2026, and the annual gift tax exclusion is $19,000 per recipient for 2026.

Example: A client with a $20 million estate establishes an irrevocable life insurance trust (ILIT) to exclude...

Large organizations that invest on behalf of members or clients, including banks, insurance companies, investment companies (mutual funds), trust companies, broker-dealers, and employee benefit plans (the adviser registration exemption requires $1 million+ in plan assets). Subject to different regulatory treatment than retail investors under the Uniform Securities Act, including exemptions from state registration for certain transactions. Not the same as accredited investors: a wealthy individual can be accredited without being on the Uniform Securities Act's institutional list (FINRA, however, treats any person, including a natural person, with total assets of at least $50 million as an institutional account).

Example: A state pension fund with $500 million in assets qualifies as an institutional investor and can part...

An offering of unregistered securities to a limited group of investors that is exempt from SEC registration requirements, primarily conducted under Regulation D. Most commonly structured as Rule 506(b) offerings (no general solicitation, up to 35 non-accredited investors who are sophisticated alone or with a purchaser representative, plus unlimited accredited investors) or Rule 506(c) offerings (general solicitation permitted, only verified accredited investors). Securities sold are restricted and subject to resale limitations.

Example: A technology startup raises $25 million through a private placement under Rule 506(b) by selling equ...

An investor classification that allows performance-based compensation under Investment Advisers Act Rule 205-3. Requires at least $1.4 million in assets under management with the adviser, or net worth in excess of $2.7 million (excluding primary residence), under thresholds effective June 29, 2026; qualified purchasers and certain executive officers and investment-active employees of the adviser also qualify. A separate test from the accredited investor standard, with higher dollar thresholds, used specifically for charging performance fees.

Example: A client with $1.5 million under management with an adviser qualifies for performance fees (meets th...

An investor classification under the Investment Company Act used primarily for private funds that rely on the qualified-purchaser exemption. A natural person generally must own at least $5 million in investments, while the institutional route generally requires owning and investing at least $25 million on a discretionary basis.

Example: An individual with $5.4 million in securities and other qualifying investments may invest in a priva...

SEC regulation providing exemptions from securities registration requirements for private placement offerings. Primary rules include Rule 506(b) allowing unlimited accredited investors plus up to 35 sophisticated investors without general solicitation, and Rule 506(c) allowing unlimited accredited investors with general solicitation permitted. Rule 504 permits offerings up to $10 million in a 12-month period with fewer restrictions.

Example: A hedge fund raises $50 million through a Regulation D Rule 506(b) offering from 80 accredited inves...

An account registration allowing securities to transfer directly to a named beneficiary upon the account owner's death, bypassing probate. The owner retains complete control during their lifetime, and the beneficiary has no ownership rights until death occurs. TOD designations can be changed or revoked at any time.

Example: A 72-year-old retiree designates her two adult children as equal TOD beneficiaries on her $800,000 b...

Custodial accounts allowing irrevocable gifts to minors without establishing a trust. UGMA (Uniform Gifts to Minors Act) permits cash and securities; UTMA (Uniform Transfers to Minors Act) also permits real estate and other property. Gifts are irrevocable and cannot be changed to a different beneficiary. Assets transfer to minor at age of majority (18 or 21 depending on state; the uniform UTMA uses 21 for gifts, and some states allow up to 25). Subject to kiddie tax: in 2026, unearned income over $2,700 taxed at parent's marginal rate for a child under 18, or a child under 19 (under 24 if a full-time student) whose earned income does not exceed half of their own support.

Example: A grandparent opens a UTMA account for their 10-year-old grandchild with $50,000. The grandparent is...