WTF does that acronym mean? Investment jargon busted from ESG to GIA

Know what an ISA is? What about ESG? Or AMC? These silly letters may not sound like much, but they can have a huge impact on your finances. So let’s brush up on the A, B, Cs of personal finance.

Ever find yourself scratching your head when your investment provider or bank starts speaking in gobbledygook? Many of us have at least a vague idea that ‘ISA’ has something to do with savings and ‘APR’ has something to do with loans, but that’s often where the comfort zone ends.

When it comes to jargon like ‘AMC’, ’ESG’ and ‘ROI’, most people who didn’t study for a PHD in Finance draws a blank. And considering these vague acronyms have a real-life impact on your personal financial future, this is no good thing. So let’s break down the most common offenders.

From acronym to accurate: your jargon-busting guide

AIM

Alternative Investment Market

This is a part of the London Stock Exchange that any company can trade on. There’s no minimum company size and they don’t even need a trading record, so it’s a much riskier market to invest in.

AMC

Annual Management Charge

This is a charge on an investment that is managed by a person. If your AMC is 2%, you’ll pay 2% of whatever your investment is worth. So if you have £100 invested, you pay £2 a year. If that investment grows to £150, you pay £3. How do fees affect returns?

APR

Annual Percentage Rate

Not really investment jargon, this one, but so common and confusing that it’s worth a mention. APR is related to loans, and refers to the total interest you’d need to pay over a full year. If you borrowed £100 at 12% APR, you’d pay an extra £12 in interest over the year, so £1 (or 1%) each month.

AUA or AUM

Assets Under Administration or Assets Under Management

This £ figure refers to the amount of money a company holds for its clients. AUA is the total amount sitting in clients’ accounts, and AUM is how much money the company actually invests and controls. It gives you an idea of how many other people trust the company to look after their money.

ESG

Environmental, Social and Governance

This is a really boring term for a really interesting topic. It’s all about ethical/responsible/sustainable investing – making the world a better place while also growing your money. If an investment has ESG goals, it aims to help the environment, make positive social change, or influence how companies are run. Read stories from ESG investors.

ETF

Exchange Traded Fund

A collection of investments that follow a certain theme, grouped into one bucket. An ETF can be bought and sold on the stock market like a share, with the benefit of spreading your money across multiple companies. Which is less risky. More on ETFs.

FCA

Financial Conduct Authority

The regulator. The judge, jury and executioner of the UK finance industry. The good guys. Their job is to make sure finance companies don’t screw over their customers (too much), and you can get a sense of what they do on the FCA’s recent accomplishments page.

FTSE

Financial Times Stock Exchange

You’ll usually see FTSE (footsie) in the form of a list of shares. The FTSE 100, for example, is a list of the 100 biggest companies you can invest in in the UK. There are tons of different lists to suit your preferences (such as excluding tobacco and guns) so have a look.

GIA

General Investment Account

A basic account for keeping your investments in. It doesn’t come with any tax benefits, like an ISA does. But it doesn’t have any restrictions on how much you can keep in it.

IFA

Independent Financial Advisor

Qualified professionals who can help you tidy up your financial present and plan for your financial future. Money doctors, essentially. You pay them a fee to make recommendations that are in your best interest – they cannot take commission to give certain companies preferential treatment. Do you need an IFA?

ISA

Individual Savings Account

The most common type of tax-free savings account. You can deposit and protect up to £20,000 a year in it – in both cash and shares – and you won’t have to pay tax on any interest or growth. More on ISAs.

JISA

Junior Individual Savings Account

The kiddy version of an ISA (see above). You can save into one JISA for each child you have – up to £4,368 a year, tax-free – and the child can only access the money when they turn 18. More on JISAs!

KIID

Key Investor Information Document

A simplified prospectus that details all the essential info on a fund you’re invested in. Although they should be in plain English and easy to compare, they often aren’t. And that’s why it’s one of the things we’re trying to help the industry change.

LISA

Lifetime Individual Savings Account

Yet another member of the ISA family (see above). Anything you save into it is tax-free, but this time you’re not allowed to take the money back out unless you’re buying your first home or retiring aged 60 or older. In return for your patience, the government gives you an extra £1 for every £4 you save. More on LISAs.

OCF

Ongoing Charges Figure

The overall annual fee you pay a fund manager. It includes everything from their wages and brain power to any additional admin costs. However, it doesn’t include the costs of buying and selling investments, as this money doesn’t go to the fund manager.

ROI

Return On Investment

An important one, this. In investing, any money you make is called a return. So your ROI measures how much of a return you’re making. If you invest £1,000 and make 5% ROI in a year (which is a pretty standard result) then you’d have made £50.

SIPP

Self Invested Personal Pension

All pensions are investments (that’s how they grow over time), but a SIPP is a pension where you’re in the driving seat. You choose the shares you’re invested in, and when to buy or sell. As with other pensions, you get extra £20 from the Government for every £80 you save. (Plus an additional £20 if you’re a higher earner.) More on pensions.

Have we missed what you’re looking for?

If you’re looking for something in particular but can’t find it here, we’re not that surprised – there are thousands of these awkward little so-and-sos floating about and these are only the most common ones. To get some much-needed clarity, Tweet us about it or ask one of our experts a question and we’ll update this page. We’re always happy to lend a hand where we can.

Next up: Free online calculators for pensions, savings and taxes