Sorting Through the Financial Advice and Retirement Planning Jargon
Transparency is a key aspect of our business. The information below is designed to help you understand many of the terms used in the financial and tax system. If there any acronyms or fancy jargon you would like explained, let us know and we will add it to the list.
ABP: Account Based Pension- A form of superannuation that pays you a regular income stream.
AFSL: Australian Financial Services Licence- A Licence for any Australian businesses involved in the provision of financial services. It is issued by the Australian Securities and Investment Commission (ASIC).
AML: Anti-Money Laundering- Refers to a set of procedures, laws and regulations designed to stop the practice of generating income through illegal actions. It is one of the reasons we need to have a copy of your current ID.
APRA: Australian Prudential Regulation Authority- A regulatory body that oversees the financial services industry on behalf of the Australian Government.
AR: Authorised Representative- Person appointed and authorised to provide financial planning services by a holder of an Australian Financial Services License.
ASFA: Association of Superannuation Funds of Australia- A policy, research and advocacy body for Australia’s superannuation industry. They provide data on estimate of living costs for retirees.
ASIC: Australian Securities and Investment Commission- An Australian Government body that acts as Australia’s corporate regulator. ASIC’s role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors.
ASX: Australian Stock Exchange- An Australian public company that operates Australia’s primary securities exchange. More simply, this is the Australian Sharemarket..
ATO: Australian Taxation Office- The Australian Government principal revenue collection body for the Australian Government. The ATO has responsibility for administering the Australian federal tax system, superannuation legislation and other associated matters.
ATP: Authority to Proceed- A document we will ask you to sign to confirm that you understand and accept the recommendation in our Statement of Advice.
AWOTE: Average Weekly Ordinary Times Earnings- Refers to one week’s earnings of employees for award, standard or agreed hours of work, excluding overtime. It is calculated before taxation and before any other deductions have been made.
CAR: Corporate Authorised Representative- Company appointed and authorised to provide financial planning services by a holder of an Australian Financial Services License. Gary Lucas Financial Advice Pty Ltd is an example of a CAR.
CC: Concessional Contributions- Pre-tax or tax deductible superannuation contributions. They include the super guarantee paid by your employer, salary sacrifice contributions and any other contributions where a tax deduction has been claimed.
CCC: Concessional Contribution Cap- The limit on the amount of CC that can be made in one year before penalty tax is applied. As of 1st July 2017, the limit is $25,000 per year in total
CFP: Certified Financial Planner- A professional certification attained by a person who has successfully completed the requirements of the Financial Planning Association. Gary Lucas is an example of someone who has CPA status.
CHESS: Clearing House Electronic Sub-register System- This is the system for recording the number and type of shares you hold.
CPI: Consumer Price Index- Commonly referred as inflation. An index of the variation in prices for retail goods and services representative of consumption expenditure.
CPD/PD: Continuing Professional Development/Professional Development- A term used to describe the training criteria that Financial Planners must meet.
CTF: Counter Terrorism Financing- Security measure in place to help fight the financing of terrorism. This is why in some cases we need to understand the source of the funds you have to invest.
DVA: Department of Veteran Affairs- Delivers Government programs for war veterans, members of the Australian Defence Force, members of the Australian Federal Police and their dependents.
EU: Enforceable Undertaking- Usually applied by ASIC to Financial Planning firms to improve compliance with the laws. It is a legally binding agreement.
FOS: Financial Ombudsman Service- An independent dispute resolution organisation that is accessible to consumers free of charge.
FPA: Financial Planning Association- An Australian based professional organisation, that helps members of the public find an ethical, objective, client-focused financial planner.
FSG: Financial Services Guide- A document that Financial Planners must provide to clients at the earliest opportunity after their initial contact. It explains who is responsible for the advice, the services available, fees and other key points designed to help you make a decision on whether to engage the planner.
FUM/FUA: Funds Under Management/Funds Under Advice- Measures the total market value of all the financial assets which a financial institution (such as a managed fund) manages on behalf of its investors and themselves.
ICR/MER: Indirect Cost Ratio/Management Expense Ratio- A measure that combines all costs of an investment into one number, shown as a percentage of the investment.
IPO: Initial Public Offering- The first time that the stock of a company is offered to the public as part of the process of listing on a stock exchange.
LITO: Low Income Tax Offset- Is a tax rebate provided by the Australian Government for individuals on lower incomes.
LPT: Listed Property Trusts- A trust that is listed on the ASX, that undertakes property investments.
MIS: Managed Investment Scheme- Another term for a Managed Fund.
MTR: Marginal Tax Rate- The percentage of tax taken from your next dollar of taxable income above the previous income threshold.
NCAP: Non-Commutable Allocated Pension-An income stream that is commenced using superannuation savings. Lump sum withdrawals (commutations) cannot be made from the capital value of the pension. Only pension payments can be received from this type of income stream.
NCC: Non-Concessional Contributions- These are after-tax contributions. So, no tax deduction when contributing, no tax on withdrawal and no tax to your dependants upon your death. Non-Concessional Contributions are capped at $100,000 for the 2017/2018 financial year. Amounts in excess incur a penalty tax.
NTA: Net Tangible Assets- The total assets of a company, minus any intangible assets (such as goodwill), less all liabilities.
PDS: Product Disclosure Statement- A disclosure document for use in offers of financial products to investors. Financial service providers must provide a PDS when recommending a financial product.
PI: Professional Indemnity Insurance- A form of liability insurance which provides coverage in the event of a claim against advice or services provided.
PM: Portfolio Manager- A person or an organisation responsible for investing the assets of a managed fund, by implementing its investment strategy and managing day-to-day portfolio trading.
RCV: Residual Capital Value- The amount remaining at the end of an income stream’s term, consisting of a portion of the initial capital invested in the income stream.
RE: Responsible Entity- An organisation that has ultimate responsibility for the operations of a managed fund. This is a separate entity to the Investment Manager and other parties. It provides a high level of oversight and aims to protect investors.
RG: A Regulatory Guide issued by ASIC. This document outlines how ASIC will apply laws.
RM: Responsible Manager: A person appointed under an AFSL to oversee and manage the compliance of the Licensee.
ROA: Record of Advice- A simple document that is provided to an existing client, confirming that advice has been provided and implemented. It can only be used in limited circumstances and after a Statement of Advice has been previously provided.
ROI: Return on Investment- Usually expressed as a percentage and typically used for personal financial decisions to compare a company’s profitability or to compare the efficiency of different investments.
SG: Super Guarantee- A compulsory system whereby superannuation contributions are made by employers on behalf of their employees. The current rate is 9.5%. Employers who do not pay the correct superannuation contributions by the due date must pay the superannuation guarantee (SG) charge.
SMSF: Self Managed Super Fund- A form of superannuation fund where the investors manage and have responsibility for the operation of the fund, rather than a fund manager.
SOA: Statement of Advice- A document containing a written explanation of the adviser’s advice to a client. It explains and records the advice, the reasons for the advice and how the advice is to be implemented.
SS: Salary Sacrifice- A method of making CC to superannuation. An arrangement is entered into with your employer to have a portion of your salary paid or sacrificed into superannuation before tax is deducted.
TAP: Term Allocated Pension- A retirement income stream which is paid from superannuation. The income payment is based on the account balance and a “payment factor” at commencement and at 1 July each year.
TTR/TTRP/TRIS: Transition to Retirement Pension or income stream- A form of superannuation Pension that can be commenced, subject to certain criteria, prior to full retirement from the workforce.