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DipFS Unit 4 Key Terms
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- 1Advertising Standards Authority (ASA)The UK’s independent regulator of advertising across all
media. - 2AERAnnual equivalent rate is the interest that will be earned on
the money in one year and takes into account how often the
provider pays the interest (for example, monthly or annually),
the effect of compounding the interest and any fees and
charges. - 3AnnuityA product where the customer pays a lump sum (the
proceeds of a pension fund on retirement) and, in return,
receives an agreed set annual amount for the rest of their
life. - 4Bad competitionWhere there is a small number of large, powerful providers
on the market that only aim to maximise their sales, which
may result in a lack of differentiation in products and misselling. - 5Bank rateThe interest rate that the Bank of England uses when it lends
money to other banks. Financial services providers take
account of the Bank rate when they decide how to set interest
rates on their own products. - 6Banking Act 2009This Act provides a set of tools to allow the regulatory
authorities to resolve (ie wind up) a bank or building society
that is in financial difficulty in an orderly way, and so to
reduce the impact of a bank failure on financial stability and
bank customers. - 7Barriers to entryThe features of the market that make it difficult for new firms
to enter and compete. - 8Barriers to expansionThe features of the market that make it difficult for new firms
to grow. - 9Brand awarenessRecognition of a brand’s products and qualities by current
and potential customers. - 10Brand extensionWhere new products launched by a business can benefit from
the positive reputation associated with the business’s
existing brands. - 11Brand loyaltyContinuing to buy a particular product or buy from a
particular business even if new and better products are being
introduced by competitors. - 12BrandingThe name, design, logo or symbol that identifies the product
of one provider from that of another. - 13BroadsheetsNewspapers that provides in-depth coverage, with a serious
tone to their articles and editorials, eg The Times. - 14CashbackA service offered by some retailers when customers pay by
card. The retailer gives the customer cash and debits the
amount of cash handed over from the customer’s payment
card. - 15Catastrophe bondsBonds purchased by investors who receive a good rate of
interest as long as the catastrophe the bond covers does not
happen. If it does occur, then they lose their capital and the
insurance company does not have to pay them back what
they invested; this helps the insurer to lessen its exposure to
the disaster. - 16Catastrophic lossA loss in excess of unexpected loss which is unlikely but
which could conceivably happen - 17Challenger banksAny new bank that challenges the ‘big five’. For example,
Virgin Money, Metro Bank, TSB, Williams and Glyn, the Post
Office and Tesco Bank. - 18Closed questionA question format that limits respondents’ answers, for
example to ‘yes’ or ‘no’. - 19Cold callingTelephone calls that were not requested by the person being
called, commonly used for market research and sales. - 20Competition and Markets AuthorityThe body responsible for strengthening business competition
and preventing and reducing anti-competitive activities. - 21Competitive marketA market where there is a large number of sellers and where
no one of these is so big that it can dominate the market. - 22Concentration ratioThe percentage of a particular market accounted for by a
certain number of firms. - 23Conduct of businessThe way in which a business is run. In financial services, the
FCA enforces conduct of business regulations, which include
requirements for providers to carry out their operations with
integrity, skill and diligence, treat customers fairly and
communicate with them clearly. - 24Consolidation loanA loan used to pay off a number of different debts, meaning
that there is then only one payment to make each month, to
the loan company. - 25Consumer protectionDesigning products and services with customers’ needs in
mind, rather than making maximum profits the absolute
priority. It also involves ensuring that customers are not sold
products that are unsuitable for them, and that they are
treated fairly. - 26Consumer protectionDesigning products and services with customers’ needs in
mind, rather than making maximum profits the absolute
priority. It also involves ensuring that customers are not sold
products that are unsuitable for them, and that they are
treated fairly. - 27Corporate social responsibility (CSR)Any action or project in which a company goes beyond the
interests of its shareholders and senior management in order
to benefit other stakeholder groups, normally with either a
social or an environmental purpose. Also known as
citizenship or sustainable responsible business. - 28CounterpartiesPeople and organisations (eg companies) who lend money to
and borrow from financial intermediaries (ie financial
institutions such as banks). - 29Credit unionA mutual organisation (that is owned by its members) that
provides a range of financial products, eg savings accounts
and personal loans to members. Members of a credit union
must share a common bond, eg all work for the same
employer or all work in the same district. - 30Customer inertiaThe idea that customers are reluctant to change their
financial services provider and therefore tend not to
challenge poor service. - 31Customer retentionActivities undertaken to persuade existing customers to stay
with a business. - 32Customer-led approachWhere a provider finds out what people need or want and
then designs a product to satisfy this need. - 33CyberterroismThis is a situation where terrorists deliberately attack
computer networks by uploading viruses that cause links and
files to malfunction and data to be deleted. - 34DeleveragingReducing the amount of debt in relation to assets. In
personal terms, this might mean paying off loans, credit
cards, etc. - 35Digital exclusionAnother aspect of financial exclusion – the inability to take
part in the computer-based society - 36Direct sellingSales that are arranged directly between the customer and
the provider without the intervention of a financial adviser. - 37DivestmentThe process of selling off parts of a company to make it
smaller, eg the Lloyds sell-off that created new TSB branches. - 38Economic climateThe state of the economy at a given time - in a good
economic climate people are more inclined to spend money
and invest; in a poor climate they are less.likely to do so. - 39Economic sustainabilityEnsuring that economic activity is carried out in a way that
ensures it can continue in the long term, eg by taking
account of the capacity of natural and human resources to
sustain it. - 40Effective competitionWhen the providers on the market compete to provide the best
product, rather than taking advantage of lack of customer
awareness or poor regulation - 41Environmental sustainabilityReducing the negative impacts of human activity on the
environment so that natural resources can be sustained into
the future, eg by reducing atmospheric pollution and making
more use of renewable resource - 42Equator PrinciplesA set of ethical benchmarks for banks to follow when taking
decisions to finance infrastructure projects such as dams or
pipelines. - 43Ethical investmentAn investment made in a company that takes into account
the wider impact of its activities on society and the
environment. - 44Ethical lendingLending money to, for example, companies that invest in
green technology or charging lower insurance premiums to
people with more carbon-efficient cars. - 45Exogenous shocksA significant event that happens without warning and that
has large and lasting effects on political, economic, and
social systems, eg the Somerset floods of 2014. - 46Expected lossThe average amount of loss that someone could expect to
face, eg loan defaults. - 47Expert biasUsing an expert from just one side of a debate, meaning that
other perspectives are not put forward. - 48External secondary dataData published by organisations such as by commercial
research companies (eg Keynote and Mintel), which providers
use for their own research. - 49Financial Conduct Authority (FCA)The organisation that regulates financial firms providing
services to consumers and maintains the integrity of the UK’s
financial markets. - 50Financial contagionA situation in which debt works its way through the global
financial system; the problems of one group of institutions
spread to other institutions, threatening confidence in and
the sustainability of financial systems. See systemic risk. - 51Financial exclusionThe inability to get access to even the most basic financial
services products and services. - 52Financial inclusionThe delivery of financial services at affordable cost to all
sections of society, including the most disadvantaged. - 53Financial intermediaryA financial institution that facilitates the process of lending
and borrowing, by taking deposits from those with a surplus
and lending those funds out to those who need to borrow. - 54Financial intermediationThe process of taking in deposits from those with a surplus
and lending those funds out to those who need to borrow. - 55Financial Ombudsman Service (FOS)An independent body set up by Parliament that settles
customer complaints about providers at no charge to
consumers. - 56Financial Policy Committee (FPC)A part of the Bank of England that monitors and responds to
risk posed to the entire financial services market. Its focus on
the whole market makes it a macro-prudential authority. - 57Financial Services Act 2010Legislation that focuses on the need for banks to have a plan
in place to deal with situations where they get into financial
difficulty - 58Financial Services (Banking Reform) Act 2013Legislation that introduced retail ring-fencing for banks and
the cap on payday lenders. - 59Financial Services Act 2012The main Act of Parliament governing the regulation of the
financial services industry. - 60Financial Services Compensation Scheme (FSCS)A compensation scheme that pays compensation to account
holders of up to £85,000 per provider if the provider goes
into default (in other words cannot pay account holders the
money they have in their accounts). - 61Focus groupA small group of customers or potential customers brought
together by the market research company or by the provider
itself to discuss how they feel about a particular product,
market or service. - 62Friendly societyA mutual organisation that offers its members a wide range
of financial products, which can include savings, investments,
insurance, pensions and annuities. - 63FTSE 100The Financial Times Stock Exchange Index, known as the
‘footsie’. It is an index of the share price of the 100
companies with the highest ‘market capitalisation’ (total
value of issued shares) listed on the London Stock Exchange. - 64Genuine competitionWhere there are several providers, who are independent of
each other, that design a range of clearly differentiated
products for consumers to choose from. - 65Good competitionWhere there is a good number of providers on the market so
that consumers have a variety of firms to choose from. - 66Gross domestic productThe total value of goods produced and services provided in a
country during one year - 67Gross interestInterest paid without tax deducted.
- 68Help to buy schemeHelp to Buy is a government-backed initiative set up to help
home-hunters purchase a property with as little as a 5%
deposit. - 69HM TreasuryHer Majesty’s (HM) Treasury, the government department
responsible for development and implementation of financial
and economic policy. - 70Ijara mortgageA form of Islamic mortgage. The provider purchases the
property, takes the legal title and sells the property to the
customer at the purchase price. The customer makes
repayments over an agreed number of years and also pays
rent to the provider for the use of the property. At the end of
the agreed term, the ownership of the property is transferred
to the customer. - 71Independent financial adviser (IFA)A professional who makes financial recommendations to
clients, based on products offered by a wide range of
providers. - 72Index-linkedRising in line with inflation.
- 73Internal secondary dataData produced by the provider that was once primary data,
eg surveys carried out or financial statements prepared. - 74InterviewsTwo-way process for collecting information from customers,
usually face to face or over the telephone. - 75Investment banksBanks that raise funds on the financial markets, rather than
accepting deposits as a retail bank does. They use these
funds to provide special services to large corporations and to
governments. Also known as wholesale banks - 76Islamic mortgagesMethods of buying a home that are compliant with Sharia law,
which forbids Muslims from making money from money (ie
earning interest). There are two main types: Ijara and
Murabaha mortgages (see separate definitions). - 77LeverageThe amount of borrowing a company has in relation to its
assets. - 78Libor scandalThe discovery that some banks had manipulated the interest
rates that they use when they borrow from and lend to each
other. - 79Liquid assetsCash or assets that can easily be converted into cash without
losing any of their value. - 80LiquidationThe process by which a company (or part of a company) is
brought to an end, and the assets and property of the
company are redistributed. - 81Lloyd’s insurance marketAn insurance marketplace where members (corporations and
individuals) employ underwriters to come together and
accept insurance risk, dividing it out between the members - 82Loan forbearanceWhen a lender does not seek to repossess a property as soon
as the borrower misses a few monthly payments, instead
allowing the customer to stop paying or make reduced
payments for a set period. - 83Loan to value (LTV)The ratio of the size of the loan to the value of the property.
- 84Long-term capital marketsFinancial markets where long-term debt (ie bonds) and shares
in the bank (equity) are bought and sold. This provides a
source of funding for banks. - 85Loss leaderA product offered by a business at a price that is below what
it costs the business to produce it; the aim is to attract
customers, who then purchase other products on which the
business does earn a profit. - 86Market researchThe action or activity of gathering information about
consumers' needs and preferences. - 87Market segmentationSplitting up the whole market into smaller segments within
which customers share particular features eg income, age,
lifestyle. - 88Market segmentsGroups of customers sharing distinct features in terms of, for
example, age, income or lifestyle. - 89Market shareThe sales that a company makes as a proportion of the total
market for the products and services it provides, or the sales
of a specific product as a proportion of the total market for
that product. - 90Marketing mixThe combination of factors that attracts and retains
customers, eg supplying the right product at the right price
and promoting it effectively. Sometimes summarised as the
4Ps or 7Ps. - 91Mass marketA broad consumer group that includes a wide range of
customers with different age, gender and income profiles. - 92Mass mediaTV, radio, newspapers, magazines and online content that
are made available to a wide audience. - 93Media biasReporting a story from a particular perspective, perhaps to
reflect the media outlet’s business priorities, or the views of
the individual journalist. - 94Middle-market pressTabloid-format newspapers such as the Daily Mail and Daily
Express that carry stories designed to appeal to a wide
audience, usually shorter and less complex than those in the
broadsheets but less sensational than those in the ‘red-top’
tabloids. - 95Monetary policyThe manipulation of interest rates to maintain low inflation.
- 96Monetary Policy Committee (MPC)The Bank of England committee responsible for keeping
inflation under control by the manipulation of interest rates. - 97Money launderingThe process of making ‘dirty’ money (money gained from
criminal activities) ‘clean’ – in other words making it look as
though it has been acquired legitimately. - 98Money laundering officerAn employee of a financial provider who must be informed of
suspicious activity in the business that might be linked to
money laundering or terrorist financing, and if necessary
report it. - 99Moral hazardA situation in which there is lack of incentive to guard against
risk because the risk-taker believes that they will be
protected from any negative consequences. For example, the
banks believing that the government would bail them out if
they got into financial difficulty and so they would not have
to face the consequences of imprudent actions. - 100Mortgage equity withdrawalAdditional borrowing based on the difference between the
value of a house and the outstanding mortgage ( ie if the
house is valued at more than the amount the owner has to
repay on the mortgage). - 101Mortgage forbearanceWhen a lender does not seek to repossess a property as soon
as the borrower misses a few monthly payments, instead
allowing the customer to stop paying or make reduced
payments for a set period. - 102Mortgage Market Review (MMR)Reforms made to the mortgage market in April 2014 to
ensure it is sustainable and works better for consumers. - 103Murabaha mortgageA form of Islamic mortgage. The bank and customer
participate in joint ownership of the property, which is
divided into shares. The customer buys these shares over a
number of years, gradually increasing their share in the
ownership of the property. - 104Mutual organisationAn organisation owned by its customers, who are also its
members, rather than by shareholders - 105Mystery shoppingUsing researchers to pose as customers, either in person or
via telephone or electronic media, to check the quality of
service that a business provides. - 106National Employment Savings Trust (NEST)A pension scheme run by a public organisation, which aims
to ensure that the majority of workers are enrolled in an
occupational pension. - 107Negative real interest rateWhere the nominal interest rate is lower than the rate of
inflation. - 108Nominal interest rateThe actual rate of interest received by a saver
- 109Objective reportA style of journalism that is free from biases, personal views
or anything else that attempts to sway people’s thinking in a
certain manner. It is purely based on facts. - 110OligopolyA market dominated by a few large firms, eg the financial
services sector. - 111Omission biasLeaving out facts and opinions that tend to disprove or
challenge any claims made - 112Open-ended questionsQuestions that cannot be answered with just 'yes' or 'no',
designed to get the respondent to open up about their
thoughts and feelings. - 113Packaged accountA current account that offers extra benefits, such as travel
insurance, for which the account holder pays a monthly fee. - 114Pareto principleStates that, in many situations, 80 per cent of the effects
arise from 20 per cent of the causes. Also known as the
80:20 rule. - 115Payday loan companiesOnline firms that provide instant, very short-term (ie for a few
days or weeks), unsecured cash advances of small amounts
to customers who need cash immediately, and who are in
employment and have payroll records. - 116Payment protection insurance (PPI)An insurance product intended to ensure repayment of loans
should a borrower face unexpected events that prevent them
from repaying the debt. - 117Peer-to-peer (P2P) lendersOnline marketplaces that enable people to lend to and
borrow from each other without using traditional financial
institution such as a bank or building society. - 118PESTEL analysisA tool used to analyse how six key areas (Political, Economic,
Social, Technological, Environmental and Legal) in the
external environment might affect individual and corporate
financial decisions. - 119Pressure groupA group who act together to try to bring about change. In the
case of financial services they try to pressure financial
services providers into making changes to the way they
develop, market and deliver their products. - 120Price sensitivityThe degree to which the price of a product affects a
consumer’s decision to buy it. - 121Primary researchOriginal research carried out by the provider itself and
tailored to its own specifications. - 122Product complexityThe idea that financial services products can be too
complicated for consumers to understand. - 123Product differentiationThe methods providers use to make one product different
from and more attractive than others that perform a similar
function. - 124Profit marginThe amount by which income from sales exceeds costs.
- 125PromotionPaid-for marketing activities, including advertising. It includes
all activities that aim to: communicate with people; inform
them of goods and services; and persuade them to buy. - 126Provider sustainabilityA company with a sustainable business model. For example,
a bank that is willing to take less risk even if this means
giving up the chance of making additional profits. If
providers are run sustainably, they will be less likely to fail
and, therefore, less likely to trigger a systemic failure. - 127Prudential regulationRegulation that is designed to ensure financial services
providers do not fail or, if they do, that their failure does not
have an impact on the wider financial system. One of the
ways that this is done is by requiring providers to hold a
certain level of capital and also a certain level of liquid assets,
so that they can meet demand from customers seeking to
withdraw funds. - 128Prudential Regulation Authority (PRA)One of the two main regulators of financial services in the UK
(the other is the Financial Conduct Authority). - 129Public relations (PR)A specific aspect of promotion known as ‘below the line’
expenditure. It is advertising that is not paid for directly but
which keeps a business’s product in the public eye. It is the
part of promotion in which the entire message is implicit. - 130Public sectorThe collective name for organisations that are funded
through general taxation eg schools, healthcare, some
welfare services. - 131Pure riskWhere risk can only have a downside, for example, loss or
damage to possessions. - 132Qualitative researchResearch based on gathering and analysing people’s feelings
and opinions. - 133Quantitative researchResearch based on gathering and analysing statistics.
- 134Real incomeThe value of people’s income in terms of goods and services
ie the purchasing power of the income or what people can
buy with the income. - 135Real interest rateThe difference between the nominal interest rate received by
the saver and the rate of inflation. - 136Real termsA value adjusted to account for changes in prices, eg real
income or real interest rate. For example, although someone
may receive a nominal pay increase of 5%, if inflation (ie rise
in general prices) is 3% then in real terms the pay increase is
approximately 5% – 3% = 2%. - 137Relationship marketingAn approach that is centred on building a long-term
relationship with customers. - 138Restricted financial adviserA professional who can only recommend certain types of
product from one or a limited number of providers. They are
not allowed to use the word ‘independent’ to describe their
advice. - 139Retail banksBanks that deal directly with consumers, for example,
providing current accounts and mortgages. - 140Retail ring-fencingSeparating the deposit-taking part of a bank or building
society from the rest of its business so that in the event of
financial difficulties the ring-fenced deposits of retail
customers cannot be used to pay the debts of the more risky
investment section of the bank - 141Sales literatureInformation such as brochures and leaflets, created by a
provider’s marketing department. - 142SamplingChoosing a certain number of people (the sample) to
represent the total population. Samples are often carefully
selected to make sure the mix of ages, gender, ethnicity,
lifestyle, etc, is proportional to the wider customer base. - 143Secondary researchResearch that is based on data that already exists (see
external and internal secondary research). - 144Sharia lawRules that devout Muslims follow, which, in relation to
personal finance, prohibit the paying and receiving of
interest, which virtually excludes a strict Muslim from doing
any borrowing. - 145Short-term money marketsFinancial markets where banks borrow over short periods (ie
months, weeks or even days), especially from the interbank
market, where banks with short-term surpluses lend to banks
with short-term deficits. - 146Social inclusionEnsuring all individuals and groups in society can benefit
from certain rights and entitlements, such as employment,
adequate housing, health care, education and training. - 147Social sustainabilityConcerned with creating communities that foster well-being,
peace, security and justice for the people who live in them. - 148Speculative riskWhere risk can have either a good or a bad outcome, for
example, a financial loss or a financial gain. - 149SpeculatorsPeople who buy and sell the shares of many companies in
order to make quick profits on the deals. - 150Stakeholder groupsThe groups of people upon whom financial services providers
have an impact – including employees, customers,
shareholders, etc. - 151Subjective biasA report based on personal views and experiences, rather
than objective facts. - 152Sustainable developmentDevelopment that meets the needs of the present without
compromising the ability of future generations to meet their
own needs. - 153Sustainable financial productA sustainable financial product is one that is designed to
meet the long-term requirements of those who buy it. - 154Sustainable financial systemA system in which financial services are delivered in a way
that means they can continue to be delivered and meet the
needs of customers over the long term. - 155Systemic riskRisk that affects an entire system. In financial services terms,
it is risk that begins with one provider or group of providers
and spreads because different parts of the financial system
are interconnected. - 156Systemically important financial institutionsThe large firms within the financial services sector that would
cause serious problems for the whole economy if they were
to fail. - 157Tabloid press‘Red-top’ tabloids eg The Sun and Daily Mirror that carry
short, often sensationalist, stories with little coverage of
financial issues. - 158Teaser rateA very low starter interest rate that makes initial payments
affordable, but which, after a short initial period, increases to
a higher rate.. - 159Telematics technologyTechnology that allows personalised insurance policies to be
created based on when and how you drive. Also known
as black box’ insurance - 160Think tankAn organisation, usually not operating for a profit, that
carries out research into topics of political, economic and
social policy. - 161'Too big to fail’Believing that the consequences of one or more of the big
banks failing would be too great for any government to allow
it to happen. - 162Transactional sellingAn approach to finding and keeping customers that centres
on the product rather than the customer. - 163TransparencyWhen customers are given full information on the products
available, the terms and conditions are clearly explained, and
customers understand what they are buying and the financial
implications involved. - 164Unexpected lossThe amount by which the actual loss might exceed the
expected loss. - 165Unique selling point (USP)An aspect of a brand that makes it different from and better
than the brands of other providers. - 166VolatilityChangeability, as when the value of an investment moves up
and down significantly in a short period. - 167Wasteful competitionWhere providers spend huge amounts of money on
designing, branding and marketing a product that is only
slightly different from those of its competitors.
Información
- Descripción
- Key terms taken from the DipFS glossary
- Creado por
- Steve Gidley · mar 2015
- Actualizado
- 16 ene 2017
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