Bankers love to baffle us with jargon. Here's our amusing guide to this gobbledygook!
After two decades working in the financial sector, I'm expert at translating the arcane language used by financial firms. Indeed, it seems to me that the whole of financial services operates as a secret cult, with its own language, customs and behaviour. Today, I'm going to decode this mysterious lingo by revealing the banker's greatest love: TLAs, or three-letter acronyms! Here's my attempt to turn gibberish into English:
AER (Annual Equivalent Rate) This shows the effective yearly rate of interest paid by a savings account, if interest is left in the account and allowed to roll up. Alternative: After Effortless Returns.
AIM (Alternative Investment Market) The London Stock Exchange's ‘junior' stock market, aimed at smaller and riskier companies. Alternative: Always Investigate Meticulously.
AMC (Annual Management Charge) The yearly fee charged by an investment manager, typically 1.5% to 2.5% of your pot. Alternative: A Massive Cut.
APR (Annual Percentage Rate) A method of showing borrowing costs, expressed as a yearly percentage, such as ‘7% APR'. The APR takes into account the interest rate and other charges for credit. Alternative: Awfully Pricey Rate.
AVC (Additional Voluntary Contribution) An extra payment into your pension, on top of the usual contribution from you and your employer. Alternative: Always Very Costly.
BoE (Bank of England) 'The Old Lady of Threadneedle Street' works to maintain a stable financial system, issues banknotes and sets interest rates to regulate inflation. Alternative: Big Old Entity.
CDO (Collateralised Debt Obligation) A highly complex derivative conjured up by financial wizards from a package of mortgages or other debts. The collapse of this ‘toxic waste' has hit investors all over the world and helped to create today's credit crisis. Alternative: Creating Disastrous Outcomes.
CGT (Capital Gains Tax) A tax paid on profits made from selling assets such as shares or property. In 2008/08, you can make gains totalling £9,600 before paying CGT. Alternative: Claiming Great Tranches.
ETF (Exchange Traded Fund) An ETF is a share which tracks a particular index or asset price. For example, the iFTSE100 is a cheap ETF which follows the FTSE 100 index. Alternative: Excellent Tracker Fund.
FOS (Financial Ombudsman Scheme) An independent service for settling disputes between consumers and financial firms. Alternative: Fines Or Standards.
FSA (Financial Services Authority) The City regulator or financial watchdog. Given the scandals involving Equitable Life, Northern Rock and so on, it could do better. Alternative: Falls Short Always.
FSCS (Financial Services Compensation Scheme) A financial compensation scheme to protect the public from losing out to failed banks, insurance companies and investment firms. Alternative: Fixes Sloppy Companies' Slip-ups.
GEB (Guaranteed Equity Bonds) A lump-sum investment with returns linked to the performance of one or more stock-market indices. Alternative: Going Easily Broke. HMRC (Her Majesty's Revenue and Customs) The taxman -- someone who grabs about three pounds out of every seven we earn. Alternative: Hand Me Ready Cash.
ISA (Individual Savings Account) A tax-free wrapper surrounding a pot of cash, shares or other investments. In 2008/09, you can shelter up to £7,200 per tax year in an ISA. Alternative: I Save Admirably.
LSE (London Stock Exchange) Europe's largest stock exchange, on which thousands of firms are listed. Alternative: Lovely Shares Empire. MPC (Monetary Policy Committee) The panel at the BoE which sets the Bank's base rate. Alternative: Must Prevent Collapse.
MEW (Mortgage Equity Withdrawal) Borrowing money against your home to spend elsewhere, for people who view their home as a cash machine. Alternative: More Easy Wonga.
PEP (Personal Equity Plan) A tax shelter which was replaced by the ISA in 1999. Alternative: Pretty Exciting Profits.
PPI (Payment Protection Insurance) An insurance policy which pays out following a death, an accident, sickness or unemployment. Alas, this is a protection racket worthy of the Mafia! Alternative: Pushing Pathetic Insurance.
TAR (Total Amount Repayable) The final tally of all the repayments and charges on a loan or other credit agreement. Alternative: Totally Astonishing Rip-off.
TER (Total Expense Ratio) A measure of all the charges levied by an investment fund, expressed as a percentage. Known by Fools as the ‘Ferrari Factor'. Alternative: Taking Every Rupee. I hope that this article has helped you to grasp financial TLAs!