What are they talking about?

Michael Drewett on the impenetrable world of financial services jargon

DIFFICULT to understand as financial services may be, things are made significantly worse by the liberal use of unintelligible jargon and convolution.

When the objective is nothing more than a comfortable retirement or some financial security, it is inconvenient and insulting to have to contend with double-Dutch. At times it may even prove dangerous to our financial well-being. So why do financial companies treat us in this way?

Jargon expert John Khan, director of Wordcraft Editing and Writing, believes it has a legitimate function in aiding communication within a common group. "However, it can be manipulated by 'insiders' to exclude 'outsiders'," he said.

To be fair, many financial brochures are now written more clearly, and try to inform rather than confuse. The danger is at face-to-face meetings.

Industry shorthand may be excusable within the trade, to allow faster execution of deals and better portfolio management. For example, a unit or investment trust composed of UK shares and without any complicated bells and whistles is usually described as "plain vanilla". That is fine for the professionals, but in a client's sitting room such language is meaningless.

Mr Khan said: "Psychobabble is a way out for an inadequate salesman, and technical financial jargon is basically self-congratulatory. His intended message is: 'Be impressed, and do whatever I tell you.' "

Philip Telford, at the Consumers' Association, feels the problem is not confined to the salesman; the institutions must also carry the blame.

"For example, I have a policy with Scottish Amicable," he said. "But they are not satisfied with something as mundane as a 'beginning' or a 'starting point'. No, my policy has a 'currency date'. What does that mean?

"If I wanted to invest in a pension scheme for my old age, it would not be sufficient to look at my basic salary and perhaps any variable bonus. Calculations would have to be made 'with reference to my fluctuating emoluments'. It sounds like something I should be treated for."

Steve Bee, pensions manager at Prudential, said he finds the constant use of jargon a turn-off. "I have heard pensions consultants discussing whether or not an individual with a Cimps [contracted-in money purchase scheme] was OK to run RAPs [retirement annuity premiums - forerunner of personal pensions] in the tax year 89/90 as long he switched into an Fsavc [free- standing additional voluntary contribution] thereafter.

"What are we doing? We don't even save money any more - we have 'premiums deducted'. I can only assume it gives some people an inflated perspective of their own importance."

In some cases, a term can mean something entirely different from what savers assume at first. "Front-end loading", for instance, is a way of taking all the charges from the payments made at the beginning of a contract rather than averaging them out over the period of the contract. Some might mistake it as a kickstart to their investment. If anything, the reverse is true. By loading charges at the start of a policy, firms ensure your savings barely benefit from the first year or two of the investment period.

Similarly, "maximum investment plans" do not offer maximum investment of your money. Instead, it is quite normal for an insurance company to snaffle all of the first six months' payments.

Convolution is just as bad as jargon. James Middleton, at the Plain English Campaign, gave one example of how a contract tried to explain the calculation of investment payments: "Each recurring accumulation in respect of an Arrangement will be equal in amount to the initial level of recurring accumulation contribution in respect of that Arrangement (included in the overall initial level of recurring accumulation contribution advised to the member)."

Mr Middleton added: "Although this all seems a harmless laugh, there is a serious point. Some people seem to think that the more important their job is, the greater their need to over-complicate things. In the end it is just a waste of money, time and resources - for example, stimulating extra telephone calls to seek clarification. It leads to more unnecessary money coming out of the consumer's pocket."

That is not the worst of it. Faced with baffling language and opaque products, investors are likely to make serious and very expensive mistakes. Arguably, the huge-scale misselling of personal pensions between 1988 and 1993 would have been far less likely if policyholders had been in a position to understand what was being done to them.

The alternative - investors refusing to have anything to do with product providers and their obscure language - is just as bad: inadequate home insurance or sickness cover could have a devastating impact financially. But until the providers put their house in order, that seems to be the road we will head down.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
tv
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
art
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine