Beyond basic financial terminology
Most of us know a few basic finance terms. However, when the discussion turns to the difference between a charitable lead trust and a charitable remainder trust or between a municipal bond and a municipal bond fund, many of us feel we’re listening to a foreign language.
That’s not a comfortable feeling, particularly when you’re trying to plot a course for your financial future. It can be even more frustrating if you work with a financial professional who uses a lot of industry jargon. In his or her defense, it’s often difficult to avoid the industry-specific terms because they are necessary in developing the strategies to help you pursue your goals.
Financial professional communication
Ideally, a financial professional should explain things to you in easy-to-understand terms — even if it entails using examples or illustrations to help you understand the concepts behind the terms or how they apply to you.
The good financial professionals do that, because they know your comfort and confidence levels are essential in helping you make educated, objective decisions about your finances. If a financial professional is using terms that don’t resonate with you, or you don’t fully understand something, it’s important for you to speak up. Good communication goes both ways in a professional relationship.
Financial terminology resources
Nonetheless, there may be financial terms that you hear or read about outside your interactions with a financial professional that are unfamiliar or confusing. Take the time to look them up and learn what they mean.
There’s no underestimating the value of increasing your financial literacy, including building your knowledge of common financial terminology. Doing so will help you understand your financial statements, as well as the strategies a financial professional suggests. You’ll be able to ask more specific questions and have a better understanding of your options. Importantly, you’ll feel more in charge of your financial future.
A good place to start is with LPL Financial’s The ABCs of Financial Terminology [PDF]. It features one term for each letter of the alphabet, making it easy to master 26 important financial terms.
Another excellent resource is the BrokerCheck glossary on the Financial Industry Regulatory Authority (FINRA) website: http://www.finra.org/investors/brokercheck-glossary. It contains terms related specifically to the search and evaluation process of a financial professional, which will be helpful if you’re not yet working with one but would like to do so. And, if you’re ready to search for a professional financial, use our financial professional search tool.