Glossary

A   B   C   D   E   F   G   H   I   J   K   L   M   N   O   P   Q   R   S   T   U   V   W   X   Y   Z

A

Absolute Return Fund
A type of hedge fund. Absolute return funds aim to meet objective performance targets rather than benchmark norms.

Accrued Benefits
Benefits already accumulated, as distinct from those to be built up in the future.  In other words, how much you have saved already.

Accumulation Fund
A superannuation fund where your accrued benefit is the total accumulated value of your contributions and interest, less fees and costs. It is sometimes referred to as a defined contribution fund.

Active Management
An investment management style which seeks to achieve returns above a benchmark through asset allocation and stock selection, i.e. through the skill of the investment manager. For example, if the Australian share market, as measured by the All Ordinaries Index, earns 10 per cent an active Australian share manager will try to earn more than 10 per cent.

Allocated Pension
A pension or annuity arrangement where a person chooses to withdraw from their account on a regular basis (e.g. monthly), an amount within prescribed legal limits, until death or there is nothing in the account. On death, the balance may be paid as a lump sum to a designated beneficiary, used to buy a further pension for a surviving spouse or may continue as a reversionary pension. The main differences between an allocated and a traditional pension are that the former offers access to the invested capital with some flexibility in the regular payment amount but it offers no protection against the money running out during the person's lifetime.

Allocation Price
The price at which a unit in a unit trust is purchased.

Annual Member Statement
A statement, required by legislation to be produced at least annually, sent to each fund member displaying specific information about their personal details and benefits. Information includes (but is not limited to): the amount at the beginning and end of the period and the calculation method; preserved amounts; member/employer contributions during the period; net earnings allotted; death benefit; and fees, charges and expenses.

Annuity
A series or stream of regular payments (e.g. a monthly pension), purchased with a life insurance or superannuation fund lump sum to provide a retirement income. Where a superannuation fund makes the payments the word 'pension' may be used. Payment amounts depend on the lump sum, expected future investment return, frequency of payments, expenses and the life expectancy of the individual purchaser or the term, if it is a fixed-term annuity. Generally, the annuitant chooses a payment value of any amount between prescribed upper and lower limits.

Approved Trustee
A trustee company approved by the Australian Prudential Regulation Authority (which must be satisfied that the company can be relied on to perform the duties of a trustee in a proper manner) and fulfils other minimum liquidity/financial requirements..Only approved trustees can promote a public offer superannuation fund.

Asset
Anything of value in the form of cash (including amounts owed), fixed assets such.as property or equipment, or intangibles such as a company's goodwill or brand..A superannuation fund's assets might include shares, property, cash or fixed interest investments. For accounting purposes, assets are resources held to produce future economic benefits, for example providing future cost savings or generating future revenue or capital gain.

Asset Allocation
The distribution of a super fund’s money across a range of asset types.(shares, property, fixed interest and cash) to make up their investment portfolio. Superannuation fund trustees base their asset allocation decisions on the relative investment outlook of the asset classes as well as the investors' risk profiles.

Asset Class
A category or class of investments that your superannuation fund can hold. The major asset classes are shares, property, fixed interest and cash, which in turn can be broken down further to include, for example, domestic or international and direct or indirect property investments.

Asset Consultant
A specialist consultant expert in helping a super fund devise its investment strategy and select investment managers to execute that investment strategy. Sometimes also called investment consultants.

Australian Financial Services Licence (AFS)
Legally, any business that offers or advises you about financial products must: hold an Australian Financial Services Licence (AFS) or be authorised to represent a licence holder.
‘Financial products' include deposit accounts, life and general insurance, superannuation and investments in managed funds, shares, debentures, and other more complex financial investments. Loans and direct investments in real estate are regulated under State laws, and are excluded from ASIC licensing. An AFS offers you various legal protections if something goes wrong. No licence means no protection. So check licence details for any financial services business early.

Australian Prudential Regulation Authority (APRA)  
One of the Federal Government agencies which regulates superannuation funds, and other financial sector bodies, ensuring they operate within specific financial guidelines.

Australian Securities and Investment Commission (ASIC)
ASIC is the Australian Government regulatory body that enforces and administers the Corporations Law and consumer protection law for investments, life and general insurance, superannuation, and banking (except lending) throughout Australia. ASIC was established in 1998 as part of the implementation of the Financial Systems Inquiry. It superseded the former Australian Securities Commission (ASC) and assumed some regulatory responsibilities formerly exercised by the Insurance and Superannuation Commission (ISC). Its web site is www.asic.gov.au.

B

Balanced Fund
A super fund or investment option that spreads its investments across a range of asset classes, but where usually around 70 per cent of the fund is held in shares and/or property. A balanced fund aims to produce high rates of return over the medium.to long term and will usually occupy a middle position in terms of risk – more volatile than a primarily cash and fixed interest fund but less volatile than a fund investing only in shares and property. A balanced fund may also be referred to.as market linked, managed, capital growth, growth, managed growth.

Basis Point
A commonly used measure of movement in investment return or fees/charges. One basis point equals one hundredth of one per cent. For example, if interest rates increase from 6.00 per cent to 6.25 per cent, it has moved by 25 basis points.

Beneficiary
A person for whose benefit assets are being held. Beneficiaries of a superannuation fund are the members and their dependents.

Benefit
The amount of money in the superannuation fund to which the fund member is entitled.

Brumbies
Australia's leading provincial rugby union team. A mark of a leading super fund is to have Brumbies supporters in the executive team.

Budget
A budget evaluates how much money you earn and spend over a specified (future) period of time. A budget can be devised for singles, families, businesses or governments – any entity that makes and spends money. Budgets can show you how much money you are spending and potentially where you can cut back and save additional money.

Buy-Sell Margin
The difference between the buying and selling price of shares or units in a unit trust or superannuation fund.

C

Capital growth (also called ‘capital gain”)
Capital growth occurs when the value of an asset (shares, property and so on) rise above the original purchase price. Capital growth is not realised until the asset is sold.

Capital loss
This is the loss incurred when an asset (shares, property and so on) decreases in value. This loss is not realised until the asset is sold for a price less than the original purchase price. For example, if an investor bought a house for $300000 and five years later sells the house for $250000. The capital loss is $50000.

Cash
Generally cash is a country's circulating coin and note currency. It is also one of the major asset classes and is available on short notice from online savings accounts, bank accounts and so on. It is a low risk, low return investment.

Certified Financial Planner (CFP)
CFP is recognised internationally as the highest professional designation that can be given to a financial planner. CFP practitioners have completed rigorous study in financial planning, have extensive industry experience and abide by the FPA’s Code of Ethics and Rules of Professional Conduct (see www.fpa.asn.au).

Chartered Accountant
Chartered Accountants - or CAs are university graduates who, after completing their degree, are required to pass a postgraduate program, the CA Program and also complete a 3-year period of approved practical experience mentored by a Chartered Accountant. To then retain their CA designation, members must complete Continuing Professional Education (CPE) of 120 hours in a triennium. Chartered Accountants fall into two broad categories: those in public practice and those outside public practice (working in commerce, industry, government or academia).

Commission-only adviser
These advisers charge a commission on the products they sell you. For example if a managed fund is recommended, an entry fee of between 0% and 5% may be charged on the amount invested. Alternatively, if the upfront fees are waived, then an annual management fee is charged ranging between 0.2% and 3%. This can include an ongoing trailing commission of between 0% and 2.2%, which is paid to an adviser.

Contribution Fee
Fees charged by your super fund on any contribution you deposit into the fund.

Corporate Master Trust
A publicly offered master trust targeted at larger employers, normally marketed through superannuation consultants, which may offer discounted fees and other optional services.

Complying Superannuation Fund
A superannuation fund that has chosen to be regulated under the Superannuation Industry (Supervision) Act 1993 (SIS) and which meets the Government's operational standards for superannuation funds. Only Regulated Superannuation Funds can be complying funds. If a fund is not a Regulated Superannuation Fund and/or is non-complying, it is ineligible for taxation concessions and so it will be taxed at full company rates rather than the concessional superannuation fund rates.

Complying Pension
A pension arrangement that satisfies extra prescribed conditions and so qualifies for higher RBL thresholds.

Corporate Superannuation Fund
A superannuation fund established for the benefit of employees of a particular company, or group of companies, that is directly managed by the company..A corporate superannuation fund is sometimes referred to as an "in-house" fund.

Corporate Trustee
Where the trustee of a superannuation fund is a company. The directors of that company are trustee directors of the superannuation fund. A corporate trustee may be a professional trustee company, a separate company specifically established to take on the responsibilities of a particular fund or the company sponsoring an employer plan.

CPA
Abbreviation for certified practising accountant, a member of CPA Australia (formerly known as the Australian Society of Certified Practising Accountants).

A CPA can be a finance, accounting or business professional with a specific qualification. The member must have the following credentials to use the CPA designation: an undergraduate degree accredited by CPA Australia; completion of the CPA Program, a comprehensive postgraduate professional study program; completion of three years supervised or mentored experience in finance, accounting or business; undertake continuing professional development each year; and show continued adherence to a strict code of conduct set by CPA Australia.

Crediting Rate
The interest rate allocated to individual members' accounts after the deduction.of all fees, costs and taxes. The crediting rate is based on the fund's actual earning rate, less any amounts paid into a reserving pool, after allowances for fund costs..If the trustee has a reserving (or smoothing) policy, the fund may build up a reserve asset pool by crediting a lower amount in years of high actual earnings and using this pool to credit a higher amount than expected in years of lower actual earnings. For retail superannuation funds, the performance reported in the media is usually always the crediting rate.

Custodian
An entity, usually a company, used by your super fund to hold assets on its behalf with the main benefit being administrative efficiency and closer monitoring of invested assets. It brings together the fund's investment portfolios, collects income, reports on asset values, provides registered addresses of offshore investments and, if the trustees of a plan are individuals, eliminates the necessity to transfer ownership of assets to a new individual each time there is a change in the trustee.

D

Death Cover
The amount of money paid out to dependents or other beneficiaries on the death of the person covered.

Default Investment Option
Where a superannuation fund offers member investment choice, the default option is the option in which members' contributions and accrued balance are invested if the member does not actually elect a specific option.

Defined Benefit Fund (Plan)
Where a member's retirement benefit is calculated using a formula relating years of employer service, or fund membership, and average salary during the years prior to retirement (e.g. a retiring member may receive 15 per cent of final average salary for each year of membership). As a result, end benefits do not strictly depend on investment returns as the employer-sponsor carries the long-term investment risk and so may have a greater say in how the fund invests the money than is the case in accumulation funds.

Diploma of Financial Planning
The Diploma of Financial Services (Financial Planning) is a nationally accredited course under the Australian Quality Training Framework. It is a specialist qualification that has been agreed to by the industry as the best combination of skills for the financial planning sector. The course is suitable for new industry entrants. It aims to provide students with ASIC compliance in financial planning, managed investments, insurance, securities, derivatives and cash deposit taking.

Direct investments
Investments held directly in shares, property and so on, as opposed to indirect investments such as units in a property trust or managed funds.

Discount brokers
Discount brokers are financial intermediary who offer access to shares or other securities at low commission rates. They may also offer limited advice or research services compared with conventional brokerage firms.

Disablement
Refers to permanent or temporary, short or long term sickness or incapacity. The definition spectrum ranges from a person's inability to perform their normal occupation to an inability to perform each and every duty of any occupation for which they are qualified by education, training or experience. The definition applied to an individual case depends on the type of disability and the insurance policy terms and conditions. The permanent disablement definition is usually more strict than temporary disablement, meaning there are more requirements and it is more difficult to prove permanent disability than temporary disability. Superannuation and tax legislation also define 'disablement'. The tax legislation definition is used to determine whether benefits receive concessional tax treatment on payment.

Discretionary Investment Option
An investment option where the individual investor selects the underlying investment product or investment manager.

Diversification
Refers to when investments are spread across a number of individual assets, classes of assets, countries or investment managers. The objective of diversification is to reduce total overall risk.

Diversifying
This is a risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimise the impact of any one security on an overall portfolio. Diversification is possibly the best way to reduce risk. This is why managed funds are so popular with many investors.

DIY superannuation
Also called 'Do-it-yourself' super, SMSF (Self Managed Super Fund) or SMS. DIY super funds give you the ability to invest your super benefits into direct investments like shares and real estate. The members of the fund, who must also be the trustees, unless a corporate trustee is appointed, run DIY funds.

E

Earnings Rate
The rate of investment return achieved by a superannuation fund before the deduction of fees and taxes. Also called yield, return, return on investment, rate of return. The earnings rate can be expressed either before tax, (i.e. based on gross earnings) or after tax (i.e. on net earnings).
Eligible Termination Payment (ETP)
Generally a lump sum payment from a superannuation fund or RSA or an employer.to an employee when he/she ceases employment. Provided the recipient is under age 65, the ETP can be rolled over into a deferred annuity, alternative superannuation fund or RSA. For tax purposes it is split into a number of components: excessive component (tested against the individual's RBL); pre-July 1983 component.(5 per cent of this component is taxed at the individual's marginal tax rate); concessional component (not able to be paid from superannuation funds from.1 July 1994, although they may still be paid directly by employers); post-June 1994 invalidity component (from 1 July 1994, consists of invalidity payments and is tax free); non-qualifying component (assessable as ordinary income on the non-rollover component); undeducted contributions (no tax is payable); post-June 1983 component (tax treatment depends on age and amount of payout).

Employer-Sponsored Fund
A superannuation fund created by an employer or group of employers for the benefit of employees. Employer sponsored superannuation funds include corporate funds, government funds and industry funds.

Estate Planning
Estate planning is specific form of financial planning that ensures your assets pass in an orderly and efficient manner at your death to designated individuals. Estate planning includes writing wills, setting up trusts, establishing Powers of Attorney, and planning ahead to avoid unnecessary taxes.

Ethical Investment
An investment where assets are selected based upon some ethical, environmental or social critereon.

Exit Fee
A charge levied on a member's benefit when all or part is withdrawn from a superannuation fund or RSA. Exit fees, also called redemption fees or charges, vary substantially between funds.

F

Fee for service adviser
Fee-for-service advisers charge an hourly rate or flat fee for the preparation of a financial plan and/or ongoing services. For example, an adviser can charge between $120 and $400 per hour. Fee for service can also be a percentage charged against the amount invested (See premium service fee).

Financial goals
There is six financial goals consumers commonly identify as potentially important: self-sufficiency, spouse's financial security, financial control, leaving an inheritance, qualifying for Centrelink support and privacy.

Financial plan
A financial plan provides a strategic 'road map' that will help you achieve your financial and lifestyle goals. The six main components of a comprehensive financial plan include the financial planning process, risk management, investment planning, tax planning, retirement planning, and estate planning.

Financial planner
A financial planner is a professional who analyses a client's overall financial situation and develops a comprehensive plan that meets his/her goals and objectives.

Financial planning
The process of providing comprehensive advice and assistance to a client for the purpose of meeting a client's financial needs and life goals. The process normally includes six steps: data gathering, goal setting, identification of financial issues, preparation of written options and recommendations, implementation of the client's decisions, and periodic review and revision of the plan.

Financial Planning Association (FPA)
The FPA is the peak professional organisation for the financial planning industry in Australia. FPA provides a range of services to consumers, members and organisations. Its web site is www.fpa.asn.au.

Financial services guide (FSG)
A licensed financial services provider must give you a written financial services guide (FSG) when you contact them. The FSG explains: the services they offer; how they operate; how they get paid (including any commissions); how they deal with customer complaints plus any interests, associations or relationships that could influence them. The information in a FSG should be presented clearly and concisely, with enough detail for you to make an informed decision about whether you want the services described.

Fixed Interest
Fixed interest investments (including bonds, debentures and term deposits) are debt securities that provide a fixed flow of income over a fixed investment period (or term).

Fund manager
A financial institution that specialises in the investment of a portfolio of assets on behalf of individuals and organisations, subject to the guidelines and directions of the investor. Fund managers offer pooled investment products and individual portfolios to a range of investors including superannuation funds, institutions, and individuals.

Full Vesting
Where a member is entitled to the full benefit accrued in their name in a superannuation fund.

Fund of Fund Investment Option
An investment option where the investor selects a general risk profile but the.super fund or master trust provider selects the underlying investments from a range of products managed by external investment managers. Can also be referred to as multi-manager options.

G

Gearing
Gearing is a term used to reflect the ratio of your own money versus borrowed money used to buy an investment. Positive gearing occurs when you borrow to invest in an income-producing asset (rental property) and the returns (income) from that asset exceed the cost of borrowing. An investment is negatively geared when borrowing costs exceed returns.

Glossary
A list of complex definitions made up by superannuation experts to confuse their customers.

Government Superannuation Plan
A fund run for government employees. Similar to corporate funds except the members are public servants.

Group Life Insurance
Insurance arranged for a group associated in some way (e.g. superannuation fund members), for whom certain assumptions about an average state of health can be made. Premiums are often cheaper for each individual in the group than if the person had arranged their own insurance. Most funds acquire group life insurance for each member up to certain levels (the automatic cover limit) without having to provide evidence of insurability or good health.

Growth Assets
Assets having the potential to achieve capital growth over the medium to long term; generally regarded as shares and property.

Growth Investment Manager
An Investment manager that picks stocks in which to invest where prices are likely to move with the market and economic trends. Sometimes referred to as "momentum managers".

Growth Pensions
See term allocated pensions.

H

HECSHELP
HECS-HELP is a loan available to eligible students enrolled in Commonwealth supported tertiary institutions. A HECS-HELP loan will cover all or part of the student contribution amount. If you receive a HECS-HELP loan, the Australian Government pays the loan amount directly to your higher education provider (university and so on) on your behalf. A HECS-HELP debt is lodged with the Australian Tax Office (ATO) against your Tax File Number.

Hedge Fund
An investment fund that invests into financial instruments not normally available to mainstream investors, e.g. derivatives and options, and trades on these tactically and strategically.  Reflecting these approaches, hedge funds generally do not follow normal benchmarks.

Home insurance
Home insurance, or ‘homeowners insurance’, is an insurance policy that combines insurance on the home, its contents, and, often, the other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home.

I

IMAs (or Investment Management Agreements)
IMAs are contractual agreements between investors and an investment manager stating the terms and conditions applying to the management of the investment assets. In the case of superannuation, IMAs must be made in writing, and include provisions directing a manager to provide appropriate information to a trustee in relation to investment returns and the management process. In turn this allows a trustee to assess the manager's investment management capabilities.

Income protection insurance
Income protection insurance is where an insurer pays a specified amount of money (usually monthly payments) if you become disabled and unable to work.

Income Stream
The cash flow of an asset. Usually paid to the owner on a regular basis and may represent a large part of the return (as in the case of bonds) or a smaller part.(as in the case of equities).

Indexed Investment Management
When your super fund’s investment managers try to match, or replicate,.the performance of the investment markets. E.g. if the Australian share market returns 10 per cent, an indexed investment manager should have earned 10 per cent. The main reason for using an indexed investment manager is that their fees can be lower.

Industry Fund
A multi-employer superannuation fund, in many cases established by parties.to an industrial Award, eg employer associations and unions, usually covering a specific industry or range of industries.

In-house Superannuation Fund
The same as a corporate superannuation fund.

Insurance
Financial protection against a possible future event with the terms of coverage specified in the policy document. Insurance normally offers protection for individuals, families and other dependents in the case of death and disability where the protection is against injury or ill-health which would prevent normal employment.

Investment Choice
Where members of a superannuation fund are able to choose from a range of investment options how their money is invested. Same as Member Investment Choice.

Institute of Chartered Accountant (ICAA)
The ICAA is the Australian professional body for Chartered Accountants. (See Chartered Accountants).

Investment fees
These are fees paid to the fund managers to look after your super fund’s investments. These fees are charged as a percentage of your account balance.

Investment Manager
An organisation that invests a portfolio of assets on behalf of other individuals and organisations, subject to the guidelines set out by the individual or organisation. Also referred to as a fund manager.

Investment Option
One of the investment choices from which the member may chose to invest if the fund offers investment choice.

Investment Menu
The full list of a super fund’s investment choices.

Implemented Consulting
An extension of traditional asset-consulting services where investment advice and funds management are combined into the one service. Effectively, this allows a superannuation fund to delegate the role of selecting investment managers to the asset consultant. It is an extension of a super fund outsourcing its administration function.

J

K

L

Licensed securities dealer
A licensed securities dealer holds a licence granted by the Australian Securities and Investments Commission (ASIC) and can carry on a securities business or operate a managed investment scheme or both.

Licensed stock broker
Stockbrokers are specialised advisers who deal in the share market. They must hold a licence that allows them to deal in securities. They can also be an employee or authorised representative of a licensed dealer.  You can check ASIC's databases at www.fido.asic.gov.auto see if a stockbroker is licensed or is an authorised representative of a licence holder. If you cannot find their name on the register, contact ASIC at infoline@asic.gov.auor on 1300 300 630.

Life insurance
This is insurance cover that protects against the loss of income that would result if the insured passes away. Beneficiary then receive the proceeds and are thereby safeguarded from the financial impact of the death of the insured.

Lifestyle goals
Obviously lifestyle goals vary from person to person. But they might involve more time with the family, annual holidays, a new car and so on.

Lump Sum
In superannuation terms, the benefit taken as a single payment, rather than taken as a pension or annuity.

Lump Sum Reasonable Benefit Limit (RBL)
The limit on the amount of concessionally taxed benefits an individual is able to receive over their lifetime from one or more superannuation funds, RSAs or other sources when taken as a lump sum. In an attempt to discourage the taking of lump sum benefits, the lump sum RBL is lower than the pension RBL.

Lump Sum Tax
The tax payable on a lump sum superannuation payout. There can be as many as six components of an Eligible Termination Payment for tax purposes.

M

Managed funds
A managed fund can invest in a wide variety of assets including shares, property, cash and bonds. This spread of asset classes aims to reduce the overall level of risk your investment is exposed to, while simultaneously working to deliver capital growth over the long term.

Managed investments
(See managed funds)

Margin lending
Margin lending is a borrowing vehicle offered by various financial institutions that allows investors to borrow cash against the value of listed shares or units in managed funds. Margin lending customers are typically required to maintain a predetermined minimum equity ratio within the loan, which varies depending on the investment(s) held. If the investor's equity falls below the agreed level – as a result of adverse market movements – a ‘margin call’ is made, requiring the investor to restore the loan to the minimum ratio. This can involve paying cash from his or her pocket or selling some investments – possibly at a loss.

R

Rebate
A rebate is the return of a proportion of an investment payment – typically commissions. This will reduce the total investment outlay.

Rental property
Also known as an investment property, a rental property is a legally owned possession or real estate (home, apartment, office, industrial unit and so on). Many Australians choose to invest in a rental property because of its proven ability to provide steady capital growth. Further advantages include income from property rental and taxation benefits.

Return
An investment return is the gain (or loss) of a security (such as shares, property, bonds or cash) in a particular period. The return consists of the income and the capital gains produced by an investment. The general rule is that more risk equals bigger returns – but also potentially bigger losses.

Risk
The risk reflects the chance that an investment's actual return will be different to what is expected. This includes the possibility of losing some or all of the original investment. It is usually measured using the historical returns or average returns for a specific investment. Higher risk means a greater opportunity for high returns – and a higher potential for losses.

Rollover
The transfer of all or part of an ETP into a complying superannuation fund, RSA or is used to purchase an annuity from a life company or registered organisation.

S

Salary Sacrifice
An arrangement between an employer and an employee which involves the employee giving up part of their pre-tax salary in exchange for the employer providing an alternative benefit, such as superannuation contributions.

SelectingSuper
A complete resource for employers looking to outsource and monitor their superannuation. It comprises a suite of services, including the SelectingSuper Handbook and website and extends to monitoring of outsourced superannuation arrangements, market assessment reports, tender management and consumer report cards.

Shares
A share is a part-ownership of a company listed on the share market. When you buy shares in a company, you become a part owner in that company.

Socially Responsible Investing
See Ethical Investment.

Sole Purpose Test
The legal test used to judge a true superannuation fund. It requires that superannuation funds be maintained for the sole purpose of providing benefits.on reaching retirement or preservation age, or to members' dependents or estate.on the member's death before retirement. Other benefits approved as 'ancillary purposes' under the sole purpose test include the termination of employment and disablement due to ill-health. In order for a superannuation fund to qualify as a Regulated Superannuation Fund, it must comply with the sole purpose test.

Statement of Advice (SOA)
If a financial adviser gives you personal advice, they must supply you with a written statement of advice (SOA). This sets out their advice, the information on which it's based, how they get paid (including any commissions), and any interests, associations or relationships that could influence them. If your financial adviser gives you general advice only, then an SOA isn’t necessary. However, they must warn you the advice has been prepared without taking into account your objectives, financial situation or needs.

Style
Investment managers are often said to have a "style" that describes their approach to investing. E.g. they are active or passive, or they invest in growth or value companies. Style can be very subjective and should be interpreted with caution as some styles can change as the markets change. However, investment managers who stick to their style are highly regarded.

Super fund
A super fund is usually a trust fund, established primarily to provide benefits for members on their retirement. However it can be used to provide funds following a resignation, death, disablement or other specified events. Superannuation funds are normally governed by a trust deed and administered by trustees. Funds, which comply with legislative requirements, are also eligible for taxation concessions.

Superannuation
Superannuation is a long-term, tax-advantaged savings platform, which operates primarily to provide income for retirement. Superannuation is a key element in the Government’s long-term objective for moving retired Australians away from a dependence on Centrelink benefits and increasing the level of national savings.

Superannuation Fund (Plan) (Scheme)
In regulatory terms, a superannuation fund is defined as 'a fund which is indefinitely continuing, and is a provident, benefit, superannuation or retirement fund; or is a public sector superannuation scheme'. It is usually governed by a trust deed and administered for the primary purpose of providing benefits for members on retirement, or alternatively, on resignation, death, disablement or other specified event. Funds complying with legislative requirements are eligible for taxation concessions.

Superannuation Guarantee (SG)
A prescribed minimum level of superannuation contributions that an employer must provide for employees. The Superannuation Guarantee (Administration) Act 1992 prescribes the levels. If the employer does not meet their obligations they incur a penalty charge, known as the SGC in addition to having to pay the appropriate contributions.

Superannuation Guarantee Charge (SGC)
A charge imposed under the Superannuation Guarantee Charge Act 1992.on employers who do not meet the minimum Superannuation Guarantee requirements for their employees.

Superannuation Industry (Supervision) Act 1993 (SIS)
Legislation providing prudential, i.e. financial and governance, standards for superannuation funds administered by three regulators: the ATO, Australian Securities Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).

Superannuation Surcharge
A surcharge (tax) of up to 15 per cent imposed on certain superannuation contributions, specified rollover amounts, and termination payments. The surcharge applies to people whose annual incomes exceed prescribed limits. The effect of the surcharge is that for high income earners their level of contributions tax can be doubled from 15 per cent to 30 per cent.

T

Term Allocated Pension
An allocated pension type investment but with elements of the tax and social security benefits and concessions of complying pensions. Also referred to as growth pensions.

Term deposit
A cash deposit held with a financial institution for a fixed period and with a rate of interest that applies for the duration of the term.

Terms of Engagement
This document establishes whether a financial planner will provide on-going service to a client and the level of service.

Total and permanent disability insurance (TPD)
TPD Insurance is paid as a lump sum in the event you become totally and permanently incapacitated through injury or illness. A TPD policy is appropriate for employees and self-employed persons who would never be able to return to the workforce after suffering total disablement. It is also appropriate for people involved in home duties who are ineligible for Income Protection Insurance.

Trailing fees
Trailing fees or "trailing commissions" are paid to advisers from investors' managed fund accounts. These payments cover the cost of ongoing financial service including investment monitoring.

Trauma insurance
Trauma insurance is paid as a lump sum in the event of cancer, a stroke heart attack, major head injury and so on. If a person suffers a medical trauma, life insurance won’t help, as the person is still alive. Also policies like income protection and TPD may not be suitable because a payout depends on the impact of the event. Trauma insurance is paid if an actual incident or event occurs.

Trust Deed
A document setting out the rules for the establishment and operation of a fund. Provisions cover the appointment and removal of trustees, membership rules, receiving and investing contributions, trustee discretionary powers, and benefit payments.

Trustee
A person or company (corporate trustee) appointed under the terms of the trust deed to hold the trust assets for the beneficiaries and to ensure operation in accordance with the trust deed. Trustees owe a fiduciary duty to the beneficiaries. Superannuation trustees must also comply with certain legislative duties.

U

Undeducted Contributions
A component of an eligible termination payment (ETP) consisting of contributions made to a fund or RSA after 30 June 1983 for which no tax deductions were allowed. The undeducted contribution component of an ETP is not taxable, and does not count towards a person's Reasonable Benefit Limit.

Unit Trust
A form of pooled investment trust governed by a trust deed has trustees and is promoted and managed by professional investment managers. Investors purchase units whose value is set either by the market (if the trust is listed) or by the trustee who adjust price according to valuations (if it is unlisted). Unit trusts can include property trusts, equity trusts, cash management trusts.

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Value Investment Manager
Investment managers that pick stocks on the basis of the company's inherent potential value. In a low return market value investment managers often outperform because they better identify quality companies.

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Waratahs
The new powerhouse of Australian rugby.

Wholesale Investment Manager
An investment manager that focuses upon large investments, often from super funds. Wholesale investment managers generally are specialised companies restricted to customers with very large amounts of money to invest.

Wrap accounts
Fundamentally, wrap accounts (or wraps) allow you and other investors to pool your money to create a fund large enough to access wider investment opportunities or save costs. Wraps may also offer simpler and clearer reporting – often daily unit prices are available online. Despite the fact your money is pooled with other investors, you still maintain some control – although the level of control depends on the terms of the wrap account. Also it's usually relatively simple to switch investments by instructing your adviser or wrap account operator over the phone or by email.

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Y

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