Finance is a tricky game. Even for those heavily involved in it it’s a very complex beast. Which is why it’s unsurprising that there are calls for industry experts to simplify the terminology after a new report has found Brits are missing out on millions of pounds a year because of confusing jargon.
The report found that VaR, AMC, AER, IFA and Offshoring were the top five financial terms that Brits do not understand. The study was conducted by online investment manager Nutmeg. Katie Prentke English, Commercial Director at Nutmeg, said: “There are millions of people who are not benefiting from key products and opportunities because they are uninformed about basic financial terms.
“There are so many ways of making money go a little further, such as saving, investing, and maximising mortgages, but so few people know about them.”
Her comments mirror the report which found that two thirds of people feel they could be losing out on cash because they don’t fully understand many financial terms. This was supported by the findings of the research that concluded that Brits are missing out on millions of pounds because they can’t grasp basic financial jargon.
Even if they do understand the terminology the report suggests that still doesn’t help many people know how to use these services effectively, six out of ten are baffled about how much cash they can put into an ISA, tax free, each year. Shockingly five in ten people have no idea what the current Bank of England interest rate is and 52 per cent of those polled mistakenly thought you can get a pension in one lump sum.
The report also highlighted that 52 per cent of people also never read the small print on financial documents which require their signature.
It is worrying to realise that Brits do not understand how to use financial systems that could actually make them money but it is alarming to realise that they struggle just to decipher the terminology. It also appears they are being failed by those put in place to assist them, 74 per cent say they feel completely bamboozled when talking to financial experts – as a consequence, if they didn’t understand what was being said to them a quarter wouldn’t ask anyone to explain.
The top twenty financial terms Brits don’t understand are:
- Asset management
- Capital Gains Tax
- Endowment Policy
- Child Trust Fund
- Profit margin
- Inheritance tax
- Stock market
- Bank of England interest rate
- Tax code
When looking in to a possible solution to this issue Katie Prentke English, from Nutmeg concluded: “This study clearly illustrates the need for the industry as a whole to make financial products and services more accessible to everyone.
“This means simplifying the language, and having more ways to explain what the options are.
“We believe more and more people would be open to investing their money if they understood the benefits and that the process could be a simple one. Similarly, people would be receptive to moving money around if they knew they would benefit.”