Understanding the financial industry, estate planning, investment and insurance terminology isn’t easy. Below are some frequently used terms:

Account-based pensions: They may also be called allocated pensions. Each client has an identifiable account which is “allocated” to them. Investment returns are added to the account (or subtracted if the investment makes a loss) and regular income payments, fees and withdrawals are deducted. Income payments continue until the account balance is exhausted.  Account-based pensions offer the greatest flexibility for clients but the client is accepting the investment and longevity risks.  For some clients it may be prudent to combine an account-based pension with a lifetime or term certain income stream that provides income to meet basic living expenses with greater certainty. An account-based pension can commence at any age provided a condition of release has been met (including the transition to retirement rules.

Accumulation Fund: Is a superannuation fund where the final benefit payable is the amount accumulated in the member's account in the fund.

All Ordinaries: The All Ordinaries is a statistical measurement of around 500 companies listed on the ASX weighted according to size and commenced on 1 January 1980 at 500 points. The All Ordinaries does not include dividends paid by companies. The All Ordinaries Accumulation Index includes dividends and is therefore a better measure of the total return.

Annuity: An annuity is a right to receive a definite annual sum. This right may be perpetual, or for a lifetime, or for any other period.

Anti-Money Laundering and Counter-Terrorism Finance (AML/CTF): Money laundering is the process by which criminals use the financial system to hide the criminal origin of the proceeds of crime, turning “dirty” money into “clean” laundered money. Criminals undertake money laundering in order to reduce the risk of detection and confiscation by the authorities.  The AML/CTF Act contains compliance measures affecting the entire financial services industry, including superannuation trustees, financial planners and accountants.

Money laundering has three stages:

  • Placement: the process of inserting the proceeds of crime into the financial system.

  • Layering: moving the money around the financial system to hide its origin, for example, transferring the dirty money from one country to another.

  • Integration: withdrawal by, or payment back to, the criminals of laundered funds.

This means that any of our businesses can be impacted by money laundering — not just those that deal in cash.

Money laundering is just as serious as the underlying crimes that generate the money that is laundered. For more information about the content of the AML/CTF visit

Approved deposit fund (ADF): An ADF is an indefinitely continuing fund maintained by a corporate trustee approved by APRA, which has the purpose of receiving, holding and investing certain types of roll-over funds until such funds are withdrawn or the beneficiary reaches age 65 or dies. Most ADFs are also superannuation funds and therefore can accept contributions.

Asset Allocation: The apportionment of an investment portfolio among different asset classes (shares, bonds, property, cash and overseas investments) from time to time in accordance with the investment outlook of the investor or investment manager.  The asset allocation should meet the client's risk profile and long-term investment objectives.

Assets: possessions or property.

Asset test: This test is used, in addition to the income test, by Centrelink to calculate the amount of Age Pension you are entitled to receive. 

Australian Business Number (ABN): Is a business identifier which facilitates businesses' dealings with the government. 

Australian Financial Services Licence (AFSL): It is a licence that covers those who carry on a business of providing financial services. It replaces many of the types of licences or registrations previously required, such as a dealer’s licence and insurance broker’s registration.  Carrying on a business refers to activities that are: systematic; continuous, and repetitive.

Who needs an AFSL?

An AFSL is required by any person generally involved in:

  • the issuing or dealing of financial products, apart from the excluded items like credit or health insurance, or
  • advising.

Australian Credit Licence: From 1 January 2011, if a financial planner/accountant/mortgage broker who wanted to  engage in credit activities they must be:

  • a credit licence holder
  • a credit registered person who has submitted a licence application to ASIC
  • an authorised representative of either of the above.

If not, the financial planner must cease engaging in credit activities until they are granted a credit licence or they are authorised as a credit representative. Please note Mortgage Brokers are governed by the same legislation. You can contact ASIC (go to or phone 1300 300 630) to discuss your options. This web site will assist you in finding a financial planner/Australian Credit Licence holder and also mortgage brokers who have hold an Australian Credit Licence.

Australian Prudential Regulation Authority (APRA): Is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.

Australian Securities and Investment Commission (ASIC): The Federal Government body responsible for consumer protection in financial products, and monitoring and promoting market integrity in the financial services sector.

Australian Stock Exchange (ASX): The national organisation for dealing in shares, bonds and certain other securities.

AWOTE (Average weekly ordinary time earnings): AWOTE refers to one week’s earnings of employees for the part of total earnings attributable to award, standard or agreed hours of work. It is calculated before taxation and other deductions such as superannuation. AWOTE excludes overtime, retrospective pay, pay in advance, leave loadings, severance, termination and redundancy payments.

Bear Market: A market in which prices decline sharply against a backgroun of widespread pessimism.  The opposite of Bull Market.  Bear markets are generally shorter in dureation that bull markets.

Beneficiary: A person entitled to receive funds or property under a trust or will.

Benefit Period (for Income Protection): The benefit period starts at the end of the waiting period and is the maximum period of time the benefit amount will be paid for a particular claim. These are generally one, two and five years, to age 55 or age 65 for both sicknesses and accidents.

Binding death benefit nomination: A legally binding nomination a member can make to the trustee of a super fund in relation to their benefit (where the trustee has elected to accept nominations). The nomination outlines to whom a death benefit will be paid in the event of the member’s death. 

Bond: A debt security issued by such entities as corporations, governments or their agencies (e.g. statutory authorities).  A bond holder is a creditor of the issuer and not a shareholder.

Bull Market: An advancing market.  The opposite of Bear Market.

Business Insurance: There are three basic business protection needs that typically apply to businesses, these are: asset protection, revenue protection, and ownership protection. Whatever the business protection needs are, the financial problem is always the same.

Capacity: capacity in law refers to a person's ability to perform certain acts.  Common examples are preparing a will or entering or entering a contract.  Examples of situations which affect a person's capacity are age (e.g. a person under 18 cannot be a witness to a will) or mental state (e.g. mental illness).

Capital: (a) The value of an investment, representing the total assets less total liabilities; (b) The initial contribution to an investment used to generate investment growth and income.

Capital Gain/Loss: The difference between the sale price of a capital asset and its cost.

Capital Gains Tax (CGT): A tax on the increase in the capital value of investments, payable when the capital gain is realised.

Capital Growth: Appreciation in the capital or market value an investment, as opposed to income which may be received from the investment from time to time, e.g. dividends in the case of share investments.

Capital Guaranteed: Capital guaranteed, by law, invests 100% in deposits with Australian deposit taking institutions or in a capital guaranteed life insurance policy.

Capital Stable: A term usually describing unitised investment vechiles which have a high fixed interest and/or cash component.

Cash Management Trust (CMT): Cash management trusts invest in bank bills and other secure, short-term securities.  Investors managed a cash management trust much like a bank account.

Certitied Copy: a copy of an original document which has been signed by certain individuals, such as a Justice of the Peace.  The person signing the copy verifies the document is a true copy of the original.

Certified Financial Planner®: CERTIFIED FINANCIAL PLANNER™, CFP® and the CFP logo smallMark are the global symbol of excellence in financial planning. CFP practitioners have completed rigorous study in financial planning, have extensive industry experience and abide by FPA Code of Ethics and Rules of Professional Conduct.

Choice of Superannuation Fund/Super Choice (Standard Choice): Employers are required to give their eligible employees a choice as to the fund into which superannuation guarantee contributions are paid. It is only if the employee fails to choose, or chooses a fund which cannot be used by the employer, that the employer may choose the fund.

Compound Interest: A method of interest calculation where, in each period, interest is calculated on both the principal and interest previously accrued.

Conflicts of Interest: Advisers need to make sure that they disclose anything that the client may see as being likely to affect the impartiality of their judgment and advice. The client has the right to know any issue that may be seen as having the potential to impact on the objectivity of the advice given.

Concessional Contributions: Are contributions made by an employer for a member or by a member personally, where a deduction has been allowed and the contributions are included in the assessable income of a superannuation fund.

Consumer Price Index (CPI): An index measuring the prices at various times of a selected group of goods and services which typify those bought by ordinary Australian households.  It allows comparisons of the relative cost of living over time, and is used as a measure of inflation.

Contribution: An amount of money placed into a fund.  In relation to superannuation funds, contributions may be made by either employers or employees or both.

Contributions Splitting: Contributions to a superannuation fund or RSA may be split with the member’s spouse. Splitting is available whether the contribution is made by the member personally or by the member’s employer on behalf of the member. (Conditions apply)

Death Benefit: The amount payable by the Trustee of a superannuation fund to the beneficiaries or dependants of a member following their death.

Debenture: A type of debt security backed by the general credit of the isser and not by a specific security.

Defined Benefit Fund: Is a superannuation fund that has at least one defined benefit member.  A defined benefit member is a person whose benefit is calculated, wholly or in part, by reference to:

  • the amount of the member's salary at a particular date, being the date of the member's termination of employment or retirement or an earlier date, or the member's salary averaged over a period before retirement, and/or
  • a specified amount

Derivatives: Securities that derive their value from another security, (e.g. futures and options).

Diversification: The spreading of investment funds among classes of securities and localities to distribute and control risk.  This is a fundamental law of investment, meaning simply: 'don't put all your eggs in one basket'.

Dividend: The amount of a company's after-tax earnings which it pays to shareholders.

Enduring Guardianship: the appointment of an enduring guardian pursuant to the provisions of the relevant state or territory legislation, for example the Guardianship Act 1987 (NSW).

Enduring power of attorney: this is a type of power of attorney which continues to operate after the grantor loese mental capacity.

Equity: the value of an asset after deducting any money owing on it. 

Estate assets: real property, personal chattels, shares, cash investments; loans by the willmaker to the trustee of a trust, income or capital allocated to the willmaker from a trust and interest in asssets held as tenants in common.

Estate Planning: Estate planning can be defined as the planning and documentation of the wishes of a peson for the distribution of all assets under the control of that person following death.  The importance aspect of estate planning is that it deals not only with those assets owned by an individual pesonally but the assets that are controlled by an individual.  The preparation of a will is an essential part of the estate planning process. (Refer to Will).

Executor: The executor is entrusted with the responsibility of ensuring that the wishes of the willmaker as contained in the will are carried out.

Fiduciary Duty: Advisers must act objectively and soley in their client's best interests.  The fiduciary duty to place the client first and disregard one's own interest is the core basis for financial advising.  Failure to act in this way places the adviser's authority and goodwill in jeopardy.

Financial Ombudsman Service (FOS): FOS is an independent dispute resolution service for the vast majority of Australian banking, insurance and investment disputes.

Financial Planning Association of Australia (FPA): The professional associaton for those providing financial planning advice.

Financial Product: A financial product is a “facility” through which a person does any of the following:

  • makes a financial investment — an investor gives money to another person and that other person uses it to generate a financial return or other benefit for the investor
  • manages a financial risk — avoids or limits the financial consequences of particular circumstances happening, or
  • makes a non-cash payment or payment by cheque, electronic payment system, travellers cheques or credit or debit card.

Financial Services Guide (FSG): This information document includes:

  • on the cover - it must be called a "Financial Services Guide" but can later be called an FSG
  • the date of the FSG
  • the name and contact details of adviser and any special instructions as to how the client may give instructions to the adviser (e.g. fax or email)
  • similar information about the authorising principals, or each of them 
  • the kinds of financial services provided and the financial products to which they relate
  • who the adviser acts for when financial services are provided; a statement about the purpose of FSG and, if appropriate, other disclosure documents that the client may receive, such as an SoA or PDS (Refer to definitions of SoA and PDS in Glossary)
  • the remuneration and other benefits that the principal, the adviser or any other associated person will receive from providing the financial services
  • information about any business relationship or other association between the principal and the issuers of any financial products capable of influencing the principal when providing financial services
  • details of the releant internal and external complaints and dispute resolution schemes of the principal, and
  • statement that distribution of the FSG has been authorised by the principal.

It is an offence not to provide an FSG.

Fixed interest: an interest rate that stays the same through the term of the loan. 

Fringed Benefits Tax: Fringe benefits tax (FBT) is a tax on employers which is levied on the value of fringe benefits provided to employees in respect of their employment. The effect of FBT is to impose tax on employee remuneration, regardless of whether it is in the form of cash salary or fringe benefits. An FBT year runs from 1 April to the following 31 March.

Fund manager: a firm that provides investment management services or an individual who directs investment management decisions. 

Futures: A futures contract is a legally binding agreement to buy or sell a commodity or financial instrument at a fixed price some time in the future.

Gearing: investing with borrowed money. 

General power of attorney: this power of attorney allows the attorney to act on behalf of the grantor without any restrictions.  This may also be called an unlimited power of attorney.

Gifting: The Social Security Act and the Veterans’ Entitlements Act consider that everything a person owns or has a right to has a value. If your client gives away or sells one of their assets without receiving its full value or adequate consideration in return then Centrelink and DVA considers this as deprivation of an asset. Deprived assets are treated as financial assets for the next five years. The industry refers to this as “gifting”. (Conditions Apply)

Government Co-Contribution: To be eligible for the government superannuation co-contribution you need to meet certain requirements. Broadly, you need to:

  • have made or make personal contributions to your superannuation
  • have less than $61,920 of total income for the 2009/10 income year (assessable income plus reportable fringe benefits)
  • earn more than 10% of total income from employment or self-employment
  • not be in receipt of a temporary work visa
  • be under 71 years of age
  • be a permanent resident of Australia.

Grantor: this is the person who grants a power of attorney (i.e. provides the power to another person to act on their hehalf).  This person may also be referred to as a principal or donor. 

Group Insurance: Is an arrangement where an employer or trustee makes benefits available to employees, or eligible persons, for lump sum death and/or disability benefits, or income replacement benefits.

GST: is an indirect, broad-based consumption tax.

Hedge Fund: Generally, they are private investment funds permitted to employ a wide range of strategies in order to achieve a targeted level of return while controlling risk. Many traditional investment funds do not permit many of these strategies, which include using leverage, short selling and derivatives.

Income Protection Insurance: The aim of disability income insurance is to replace the earnings of the life insured so the impact of the sickness or injury is minimised.

Instalment Warrants: An instalment warrant is an option to buy shares in a company (normally a larger company) listed on the Australian Stock Exchange. However, whereas an option is issued by the company itself, a warrant is issued by a financial institution.

Intestacy/intestate: If a person dies without having made a valid will, the person is deemed to have died intestate. In this situation, the person’s assets are distributed in accordance with a government formula set out in an Act of parliament commonly referred to as the intestacy rules.

Joint Tenancy: Joint tenancy is where each owner of the property does not own a clearly identified proportion of the property. On the death of a joint tenant their interest in the property ceases and the ownership of the property is with the remaining tenants.

Life cover: The base component of a life policy is death cover. This can be purchased as either: (i) permanent (otherwise known as whole of life or endowment), (ii) temporary insurance (otherwise known as term insurance), or (iii) a combination of permanent and temporary.

Limited power of attorney: a power of attorney which has restrictions placed on the attorney (i.e. the attorney may only be able to act on the donor's behalf under certain circumstances or only be able to undertake certain activities on behalf of the donor.

Margin Call: Required whenever loan exceeds lending margin of nominated investments. Generally payable within 24 hours or investments will be sold.

Master Trusts and Wrap Accounts: Essentially provide a central adminstrative hub for accessing investments and also a single reporting structure at tax time.  These investment platforms allow investors to access a variety of fund managers and investment options without having to access them separately.

Mortgage Trusts: Mortgage trusts invest in mortgages over residential or commercial properties. They also include liquid investments such as cash and fixed interest securities in their portfolios as investors can redeem funds at short notice. Mortgage trusts are an alternative to cash management trusts and fixed interest trusts and do not provide capital growth.

Non-concessional (non-deductible) contributions: Where a member makes a non-concessional (undeducted) contribution, the contribution is generally limited to the amount that does not exceed the contributions cap that applies for the year. If the member has made excess non-concessional contributions, the member would be assessed to excess contributions tax and would be required to authorise the fund to release sufficient funds to negate the excessive amount.

Non-estate assets: Generally assets that are controlled but not owned or wholly owned by the willmaker are referred to as “non-estate assets”. Non-estate assets that cannot generally be disposed of by a will include:

  • jointly owned assets that are held as joint tenants eg real estate and investments
  • unallocated assets owned by a family trust
  • superannuation, subject to member direction and trustee discretion
  • life insurance proceeds
  • account-based pensions or annuities that have a reversionary beneficiary.

Options: An option is a contract tht gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price (strike price) at any time up until a specified date (expiry date).

Policy document: a document provided by an insurer or broker as proof of an insurance contract. 

Power of attorney: an official document which allows one person to act on behalf of another. 

Probate: an official document which states the will of a deceased person is their will and testament.  It allows the administration of the estate by the executor to proceed. 

Product Disclosure Statement (PDS): The role of a PDS is to provide clients with sufficient information to make an informed decision about whether or not to buy a financial product.  It must be prepared by the product issuer and be dated. 

Product Ruling: Product rulings are binding public rulings on the availability of claimed tax benefits from investment “products”. A product refers to an arrangement in which a number of taxpayers individually enter into substantially the same transactions with a common entity or a group of entities. The product may be described as an investment arrangement, a tax-effective arrangement, a financial arrangement or an insurance arrangement.

Retirement savings account (RSA): RSAs are intended to provide a simple, low-cost and low-risk savings product which employers may use as an alternative to superannuation funds for their employees, and which individuals may use for personal superannuation contributions. RSAs are primarily intended for people with low amounts of superannuation benefits or with transient working patterns.

Reverse Mortgage: Reverse mortgages are a means of providing retirees with access to the equity in their homes. An important feature of a reverse mortgage is that the loan and interest are not repayable until the homeowner moves out of the home or dies.

Rollover/rolling over: the transfer of some or all of the balance of your superannuation money from one fund or product to another.

Salary Continuance: Income-related benefits are paid if a member is unable to work (with definitions varying by company) and is totally disabled (for a period) and is still injured or sick, and is under the care and advice of their medical practitioner. Unlike individual plans where benefits are paid directly to the insured person, group policies are usually owned by employers (who are effectively insuring their payroll), and in the event of an employee becoming disabled, benefits are paid directly to the employer.  Maximum group salary continuance benefits are generally around a monthly benefit level of $20,000 to $25,000 and generally do not exceed 75% of a members pre-disability salary, with options to purchase an additional 10% to continue towards superannuation contributions. The product has a number of benefit payment periods ranging from two years or through to age 65.  Qualifying periods are very flexible and range from 30 days up to two years.

Salary Packaging: The aim of salary packaging is to enable an employee to receive a combination of income and benefits in a tax-effective manner. The key to tax-effective salary packaging is that the employee takes some of their remuneration in the form of concessionally taxed benefits instead of taking it all as fully assessable salary. This procedure is called “salary sacrifice” because the employee sacrifices some part of their salary in return for the desired benefits.

Salary Sacrifice: As employees are generally unable to claim a tax deduction for contributions to a superannuation fund, salary sacrifice provides employees with an excellent opportunity to make tax-effective superannuation contributions and boost the levels of savings.

Self Managed Super Fund (SMSF): A SMSF is a superannuation fund with fewer than five members, where the members actively participate in the fund’s management. As a general rule the member (or members) of the SMSF will be the only trustee (or trustees) of the fund or directors of a company that is trustee of the fund. The trustees of the SMSF have full responsibility for the fund’s management, investment and general administration functions, usually with the assistance of external service providers. (Please read DIY Super Fund .... It's not money yet)

Shares:Direct shares are a long-term investment (five years plus) and provide taxation advantages as well as a greater earnings potential. Shares are easily bought and sold, with a high level of liquidity and flexibility.

Social Responsible investments (SRIs): Also known as ethical investing focuses on those companies that support high ethical standards. 

SPAA: The SMSF Professionals' Association of Australia Limited ("SPAA") represents professional advisors who provide advice in the highly complex area of SMSFs advice.

SPAA SMSF SPECIALIST ADVISOR™: This mark indicates that a particular SPAA member has achieved the highest possible level of education and experience required by the SPAA Accreditation Council.  For admission to the SPAA’s Specialist Member ranks, the member agrees to be bound to the SPAA’s Rules of Professional Conduct and Ethics as published by the SPAA from time to time.  Use of the SPAA SMSF SPECIALIST ADVISOR marks is therefore restricted to those members who have received Specialist Accreditation from the SPAA Specialist Accreditation Council.  Under no circumstances may the marks be used by any individual who has not been accredited as a SMSF SPECIALIST ADVISOR by the SPAA.

Statement of Advice (SoA): A Statement of Advice (SoA) sets out the advice. Advisers must give a retail client an SoA, which can either be the means of giving the advice or a separate record of it.

Superannuation: money that you and your employer put aside in a concessionally taxed trust fund during your working life for you to use when you retire. 

Superannuation Fund: A superannuation fund is a fund set up to provide benefits to its member on retirement or death benefits to dependents on the member's death.

Tax file number (TFN): a unique identifying number issued to each taxpayer by the Australian Taxation Office. 

Tenants in common: A tenants in common arrangement is where the owners of the property have rights to a distinct proportion of the property none of which can be physically identified.

Term Deposit: Are bank products where deposits are made for a fixed time period, commonly one to three years.

Testamentary Trust: This is a trust establised by a will that comes into effect upon the death of a willmaker.  The term "testamentary trust" is used to describe a number of forms of trusts that result from the death of a willmaker.

Tax-effective investments: This refers to agricultural projects that offer investors indirect involvement in primary product.  Tax-effective investments generally provide tax benefits at the front end, in the form of tax deductions for expenses paid. Investors should always choose projects that have an up-to-date product ruling issued by the ATO.

Total Permanent Disability Insurance: TPD is designed to provide money when the insured is permanently unable to work or has lost the ability to function cognitively or physically. (Conditions Apply) 

Trauma Insurance: Trauma insurance is a benefit that covers “a life threatening medical condition or event, that seriously compromises the insured person’s current and future quality of life”.

Waiting Period (for Income Protection): The waiting or qualifying period is similar to the "excess" on a general insurance policy.  It has two main functions within a disability income policy.

  • it is the period of time the life insured must be "disabled" in order to qualify for a benefit payment
  • it is the period of time during which the life insured is bearing the risk, i.e. no "disability" benefit payment is made for the waiting period.

The waiting period can be anything from two weeks to two years.

Will: This is a legal document signed by the willmaker, sometimes called the testator, which disposes of the willmaker's assets to the people of his/her choice, referred to as beneficiaries.

Yield: Yield or return, is the annual amount received from an investment expressed as a percentage of the purchase price (or face value if purchased on issue).

CFP®, CERTIFIED FINANCIAL PLANNER® and the CFP logo are certification marks owned outside the U.S. by the Financial Planning Standards Board Ltd. Financial Planning Association of Australia Limited is the marks licensing authority for the CFP Marks in Australia, through agreement with FPSB.

The LRS® mark and Life Risk Specialist designation is owned by the Financial Planning Association of Australia Ltd.


SMSF SPECIALIST ADVISORTM, SSATM are marks owned by the SMSF Professionals' Association Australia Limited (SPAA) and are awarded to individuals who successfully comply with all the initial and ongoing accreditation requirements of the SPAA Professional Standards Committee. 

Source: CCH Australia, FPA, SPAA, ASIC and ATO.

Disclaimer: The information appearing on this website (and via the links provided on this website) is for general information only and should not be taken as constituting advice. The calculators provided in this website are for illustrative purposes only and the results they give should not be taken as constituting advice. While all reasonable care has been taken in preparing the information , in providing links to relevant websites and designing the calculators, the Roan Financial Group provides no warranties and makes no representations that the information provided or linked to (including any calculation) is correct, complete or reliable, or appropriate to your circumstances. You should obtain independent advice on any specific issues concerning you.

Roan Financial Group expressly disclaims liability for any loss howsoever caused whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly by use of this website. In addition, the provision of links to other websites should not be taken to indicate the Roan Financial Group's endorsement of any organisation, product or service referred to, or of any material provided, on those sites.