Jargon Buster

Jargon and Mumbo Jumbo in Wealth Management

Glossary of Terms

The world of finance tends to involve a lot of jargon, and this is true even at the more personal end of the industry – private client wealth management. Jargon is perhaps more of a problem in private clients than in other areas (such as corporate finance) because of the distinct information gap between investment professionals, who live and breathe the industry and its terminology, and their clients, who generally don’t have the time or inclination to commit all the terms to memory.

In this post, we set out the common TLAs (Three Letter Acronyms!) that a client is likely to encounter when discussing options with a professional wealth manager:

Terms you will encounter when building a relationship with a wealth manager:


Information gathering

KYC (Know Your Client):

KYC is a standard information gathering exercise in the investment industry that ensures investment professionals know detailed information about their clients’ risk tolerance, investment knowledge and financial position. The KYC process protects both the client and investment professional. Clients are protected by having their investment manager know what investments best suit their personal situations. Investment managers are protected by knowing what they can and cannot include in their client’s portfolio. The KYC rule is an ethical requirement for investment professionals who are dealing with customers during the opening and maintaining of accounts.

RPQ (Risk Profiling Questionnaire):

This questionnaire is intended to help the client consider risk tolerance.  It poses questions that provide some indication of the risk tolerance for a typical investor displaying the client’s characteristics.  Of course, attitudes to risk are not easily defined, so ultimately the questionnaire is designed to promote a discussion rather than present a conclusion.


Fee measures

AMC (Annual Management Charge):

The AMC is generally applied as a percentage of the assets of the portfolio, for example 1% of fund assets per annum. The AMC could also include a fixed monetary portfolio management fee. AMCs are automatically taken from the assets of the portfolio on a regular basis.

(Total Expense Ratio): The TER is a measure of the total costs associated with managing and operating an investment fund. These costs consist primarily of management fees and additional expenses, such as trading fees, legal fees, auditor fees and other operational expenses. The total cost of the fund is divided by the fund’s total assets to arrive at a percentage amount, which represents the TER.
(Ongoing Charges Figure): The OCF is similar to the TER and is defined as the ongoing costs to the funds, which includes the AMC and other charges for services such as keeping a register of investors, calculating the price of the fund’s units or shares and keeping the fund’s assets safe.


Anti Money Laundering

AML (Anti Money Laundering):

AML refers to a set of procedures, laws and regulations designed to stop the practice of generating income through illegal actions. Though anti-money-laundering laws cover a relatively limited number of transactions and criminal behaviours, their implications are far-reaching. For example, AML regulations require financial institutions to complete due-diligence procedures (such as requiring client identification documents) to ensure they are not aiding in money-laundering activities.

MLRO (Money Laundering Reporting Officer):

A firm’s designated MLRO is responsible for ensuring that information leading to knowledge or suspicion of money laundering is properly disclosed to the relevant authority. The MLRO will also liaise with SOCA (Serious Organised Crime Agency) or law enforcement on the issue of whether to proceed with a transaction or what information may be disclosed to clients or third parties.


Investment structures:

OEIC (Open Ended Investment Company):

A type of fund in the UK that is structured to invest in other companies with the ability to adjust fund size. The company’s shares are listed on the London Stock Exchange, and the price of the shares is based on the underlying assets of the fund. These funds can mix different types of investments and objectives such as income and growth, bonds and equities, and so on.

UCITS (Undertakings for Collective Investment in Transferable Securities):

The UCITS is a regulatory framework of the European Commission that creates a harmonized regime throughout Europe for the management and sale of collective funds. UCITS funds can be registered in Europe and sold to investors worldwide using unified regulatory and investor protection requirements. UCITS fund providers who meet the standards are exempt from national regulation in individual European countries.


Client protections:

FOS (Financial Ombudsman Service):

Set up by Parliament, the FOS is the UK’s official expert in sorting out problems with financial services. If a business and a customer can’t resolve a complaint themselves, the FOS can give an unbiased assessment of the situation. If the FOS decides that a customer has been treated unfairly, it has legal powers to correct the problem.

FSCS (Financial Services Compensation Scheme):

The FSCS is the UK’s statutory Deposit insurance and investors compensation scheme for customers of authorised financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. FSCS is an independent body, set up under the Financial Services and Markets Act 2000 (FSMA), and funded by a levy on “authorised financial services firms”. The scheme covers deposits, insurance policies, insurance brokering, investments, mortgages and mortgage arrangement.


Key Institutions:

FCA (Financial Conduct Authority):

The regulator of the financial services industry in the UK. The FCA has the strategic goal of ensuring that the relevant markets in the UK function well. It has three operational objectives in support of this strategic goal – to protect consumers, to protect and enhance the integrity of the UK financial system and to promote healthy competition between financial services providers in the interests of consumers. It was established by the Financial Services Act that came into force on April 1, 2013.

CISI (Chartered Institute of Securities & Investment):

The CISI was formed in 1992 as the Securities Institute by the members of the London Stock Exchange. It changed its name to the Securities and Investment Institute in November 2004. It became the Chartered Institute for Securities & Investment when it was granted a Royal Charter in October 2009. In November 2015 the Institute of Financial Planning was formally merged into the CISI.

CFA Institute (Chartered Financial Analyst):

The CFA is a professional designation given by the CFA Institute, formerly AIMR, that measures the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas such as accounting, economics, ethics, money management and security analysis.


Key regulatory developments in recent years

RDR (Retail Distribution Review):

RDR is a set of rules that came into force in 2013, aimed at introducing more transparency and fairness in the investment industry. The most significant change is that financial advisers are no longer be permitted to earn commissions from fund companies in return for selling or recommending their investment products. Instead, investors now have to agree fees with the adviser upfront. In addition, financial advisers now have to offer either “independent” or “restricted” advice and explain the difference between the two – essentially making clear whether their recommendations are limited to certain products or product providers.

MiFID (Markets in Financial Instruments Directive):

MiFID, launched in November 2007, is a European initiative to promote competition and enhance choice for investors across Europe. MiFID looks at “passporting” for financial products so that they can be traded across borders. It considers transparency and best execution.


Professional qualifications & requirements:

IMC (Investment Management Certificate):

The IMC is the benchmark entry-level qualification into the UK investment profession. It delivers the threshold competency knowledge required by investment professionals involved in portfolio management, research analysis, and other front office investment activities. The examinations cover the key content areas appropriate for these roles including economics, accounting, investment practice, regulation, and ethics. The qualification is developed, delivered and awarded by CFA UK.

CPD (Continuing Professional Development):

CPD is the intentional maintenance and development of the knowledge and skills needed to perform in a professional context.

SPS (Statement of Professional Standing):

Since January 2013 all Retail Investment Advisers have been required to hold an SPS, issued by an Accredited Body in order to practice. This confirms that the adviser adheres to ethical standards, holds the appropriate qualification for their role and has undertaken sufficient appropriate CPD during the year. The SPS is renewable on an annual basis. The CISI is recognised by the UK’s FCA as an Accredited Body for the issuing of SPS.

CWM (Chartered Wealth Manager):

The Chartered Wealth Manager Qualification is a postgraduate level specialist qualification which encompasses the breadth of knowledge needed to provide the highest quality service to clients. It is a progressive qualification comprised of three units, Financial Markets, Portfolio Construction Theory and Applied Wealth Management. It provides a sound grounding in economics and interpretation of economic statistics, financial statements, investment analysis, portfolio construction and applied wealth management.


Other popular jargon:

Risk-adjusted return:

Risk-adjusted return refines an investment’s return by measuring how much risk is involved in producing that return. Risk-adjusted returns can be applied to individual securities, investment funds and portfolios.



With thanks to FT Lexicon and Investopedia.
https://www.investopedia.com/uk/ Investopedia
http://lexicon.ft.com/ FT Lexicon