Talking money - learning the lingo

Posted on: 09 October 2014 by Steve Wanless

Steve Wanless of WWFP looks at the monetary terms trotted out by the financial services industry in simple, ordinary terms that everyone can understand.

financial jargon

If understanding the language wasn’t difficult enough, there is always the financial world’s obsession with initials. Last week the CEO of the FCA appeared before the TSC about the MAS and TPAS!

That was Martin Wheatley, chief executive of the Financial Conduct Authority, talking to the Treasury Select Committee about the Money Advice Service and the Pensions Advisory Service.

Those interested in sport recognise the ECB as the England & Wales Cricket Board; to those in the city, it is the European Central Bank. Headlines with ECB can be confusing as neither body is prone to decisive or dramatic action!

Grasping the figures relating to a pension or mortgage commitment across the desk from a financial adviser can be tough enough without occasionally getting the feeling that you are listening to a foreign language, financial speak.

That is where the Independent Financial Adviser (IFA) adds value. You are his client, not a customer. It is in everyone’s best interests that the client fully understands what is being proposed.

Keeping language simple has never been a high priority of the economists. Reading recent books by those at the heart of the banking crisis and financial collapse has generally required an intimate knowledge of the language as well as the products.

Help is now at hand. “How To Speak Money” by John Lanchester has the sub-title “What the money people say – and what they really mean.”

This new book is a “money” dictionary, explaining all the monetary terms trotted out by those giving their quarterly reviews or latest financial forecasts in simple, ordinary terms that everyone can understand.

Lanchester’s view is that the more we understand the language of “money” not only will we be better informed, but we will enjoy the financial side of our lives more. When we do come into contact with experts, this knowledge will enable us to ask more pertinent questions.

Lanchester explains: “There’s a huge gap between the people who understand money and the rest of us. A big part of this is embarrassingly simple: it’s to do with not knowing what money people are talking about.

But it’s a gap we need to close, both at macros level, in order for us to make informed democratic decisions, and a micro level, in terms of the choices we make in our lives.

We need to know what the words mean, so we can tell when they are talking dangerous nonsense. We need to know what the money men are talking about.”

Lanchester’s thoughts are available on the internet as well as in this book. He chooses “austerity” as the strangest piece of political/economic vocabulary to come along in his adult lifetime.

What ‘austere’ means in normal life is ‘harsh, stern; morally strict, severely simple.’ But that’s a general quality which doesn’t mean anything tangible, which is a problem, since in this context only the specifics matter. What we are talking about here is spending cuts. Funds are either cut, or they aren’t; there’s nothing abstract about it.

The word ‘austerity’ is an attempt to make something moral-sounding and valued-based out of specific reductions in government spending which cause specific losses to specific people.”

Anything which makes us more aware and better informed of our financial surroundings has to be welcomed.

The consumer organisation Which? has been campaigning on our behalf for many years, highlighting problems with a whole range of products and companies, many financial. As you might imagine, financial institutions have not fared too well in its “client care” table in recent years.

Times are changing. In this year’s table, the bottom five listed did not include a bank; instead two energy companies (Npower and Scottish Power) came bottom, followed by Ryanair, and phone providers TalkTalk and SSE.

And top, with an 87% approval rating, was a BANKFirst Direct, ahead of Lush, John Lewis, Lakeland and Waitrose.

What will surprise no-one is the response to the Which? question about what annoyed them about a companies’ service.

Automated phone systems came top with 43%, followed by being passed around 37% and annoying hold music 35%. What is strange is that these are the main complaints every year and some companies seem unable to solve the problem.

John Lanchester’s book will come in handy when analysing the recent report by the Office for Budget Responsibility, which revealed that the Coalition’s planned nine years of austerity (that word again) in order to balance the books is a programme of cuts not matched since the Second World War.

When the books are balanced, in 2018-19, both government spending and receipts are forecast to total roughly 38% of Gross Domestic Product (GDP) – the same as in 2001, during Tony Blair’s first term.

The OBR’s report also described the Labour government’s spending pre the recession as “reckless.” Over-optimistic forecasts and ignoring the consequences of an ageing population meant that UK’s national debt rose at the second-fastest rate of 31 of the world’s leading countries between 2004-2007!

That might explain some of the problems of 2008 and beyond. The financial world is not for everyone, but even a basic knowledge can go a long way in understanding what has happened, why it happened and when it might happen again! And remember, your Independent Financial Adviser is always on hand to help interpret things for you and guide you to your financial goals.

For a free, no obligation initial chat about your individual finances, call us on 0800 0112825, e-mail or take a look at our website

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