'I don't get excited when I hear EITC. Do you?'
This is a line from the late, lamented West Wing. The acronym EITC refers to Earned Income Tax Credit, a refundable tax credit for low to moderate-income working people. One of the characters, Charlie, is trying to fight for it, only to be told by Annabeth that this won't be easy because it doesn't have a catchy name like 'Marriage Penalty' or 'Death Tax'.
She's right. Who would understand EITC, let alone get behind it? It's the same on this side of the pond. Financial phrases like AER (Annual Equivalent Rate), DB (Defined Benefit) and OEICs (Open-Ended Investment Companies) don't exactly roll off the tongue, let alone lend themselves to easy interpretation.
And the more opaque something sounds, the harder it is to sell, despite the fact that many financial products and services benefit savers and investors.
Thankfully, the City watchdog agrees that, in some cases, too much incomprehensible jargon has been used by investment companies and advisers when communicating with their customers. A Financial Conduct Authority (FCA) market study into the asset management industry, published last month, concluded that: 'Documents tended to use jargon and abbreviations without clear explanations. Documents tended to make no attempt to make it easy and accessible for investors including lay trustees to read and understand.'
In a wide-ranging report, which also found that there is weak price competition in a number of areas of the asset management industry, and investment consultants on average are not able to identify managers who offer better returns to investors, the FCA highlighted an area that has long needed improvement.
Following the watchdog's study, Saga Investment Services surveyed more than 11,500 over 50s on the issue of language. The company discovered that while many people are financially savvy, some struggle to understand even the most commonly used jargon employed in a range of investment terminology.
Whilst 86 per cent of people knew what a SIPP (Self Invested Personal Pension) was, just 59 per cent understood that a defined benefit pension was a company pension paying a set amount when you retire - one in ten thought this was the amount of money you get from your state pension.
And while two thirds of people knew that asset allocation is the mix of different investments you choose to hold, one in five thought it was the amount of an investment you are able to buy.
However, the over 50s are much more knowledgeable about income drawdown – with 92 per cent understanding this meant taking an income from your pension while it was still invested. ISA is also well understood, with 93 per cent of people correctly saying it stands for an individual savings account.
Sally Merritt, head of product at Saga Investment Services, said: 'The investment industry has often come under the spotlight for being confusing about charges, but now we are able to reveal that even the terminology is off-putting for many people. This is an unintended consequence of the way the industry has developed over the years. Financial services can be complex, but it’s down to providers to make things as clear as possible.'
Of course, it's not just the investment industry which needs to pull its socks up. Other financial sectors, such as insurance and mortgages, need to do the same. After all, how many people, off the top of their head, could explain the ins and outs of a Help to Buy ISA, or give the lowdown on renewable term assurance?
I accept that a number of financial firms have worked hard to improve communications with their customers, and there is ample evidence that many have implemented jargon-busting strategies both online and in key documents. But we have some considerable way to go before the man on the street feels entirely comfortable with the likes of SIPPs, ISAs and OEICs.
Helen Nugent is Online Money Editor of The Spectator