Our Industry

The securities, commodities, and other investments industry has one of the most highly educated and skilled workforces of any industry.¹  You can rest assured that your independent personal financial advisor is properly licensed and supervised by our broker dealer, Allied Beacon Partners, in accordance with industry requirements.

The United States Department of Labor provides a useful definition of our industry:

"The securities industry is made up of a variety of firms and organizations that bring together buyers and sellers of securities and commodities, manage investments, and offer financial advice. The products provided by the industry are called securities. The most basic types of security are stocks and bonds, which provide capital to finance corporations. Stocks entitle their holders to partial ownership of a company, whereas bonds are a form of debt that a company pays back with interest. Investors purchase stocks and bonds in order to earn money in the form of dividends or interest, or to sell the securities to other investors at a higher price.

Another type of security is called a derivative. There are two basic types of derivatives: options and futures. An investor who holds an option has a contractual right to purchase or sell an asset at a set price on a specified date, but is not required to do so. A futures contract is an agreement to purchase or sell an asset at a set price and date with no option to decline. For example, commodities such as corn, wheat, and pork bellies are often bought and sold in this way and are among the best-known derivatives. Other goods sold on the derivatives market include foreign currencies, precious metals, oil and natural gas, and electricity. Buyers purchase derivatives with the hope that the price of the asset involved will be higher than the agreed price when the contract matures.

Mutual funds and exchange traded funds (ETFs) are also common investments. In both cases, the issuing firm owns a large portfolio of other securities which, on average, are expected to increase in value. In the case of mutual funds, this portfolio is typically managed by a team of financial analysts who determine which stocks to buy and sell; however, some mutual funds are not actively managed and are instead designed to track a benchmark index, such as the Standard and Poor's 500 or Dow Jones Industrial Average. ETFs, which also are made up of baskets of stocks, are almost always designed to replicate a stock index. ETFs can be traded like stocks, unlike mutual funds. Because both of these types of securities require management, the companies who issue them charge a fee. Investors are willing to pay this fee because mutual funds and ETFs have a lower level of risk than other securities.

Besides selling securities, segments of the securities industry also sell advisory services. Investment banks, for example, help companies to plan stock or bond issues and sell them to investors. Securities and commodities exchanges, on the other hand, provide forums for buyers and sellers to trade securities. Private banks and investment advisories help individual investors to determine how to invest their money." ²