CAUTION
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Face Value. The figure shown on a coin, banknote, share certificate, and similar, to confirm its value.

Fact Find. An important stage in the advice cycle, one which enables the adviser to draw out all pertinent information about a potential client, and to update information already held concerning an existing client.

Factor. An agent holding goods belonging to a principal for the purpose of eventual sale. The agent has implied authority to sell them in his/her own name. May also be called a Mercantile Agent.

Factoring. The buying of debts at a discount.

Family Income Benefit. A type of reducing term assurance under which proceeds in event of a claim are paid as income instalments for remainder of term. Total payments equal the reduced sum assured at time of claim.

Fee. The charge imposed for provision of professional services.

Fee Simple. The full term is Fee Simple Absolute in Possession, meaning complete and unconditional ownership of land.

Fiduciary. Relating to a relationship of trust, such as that between agent and principal, where the agent owes a duty to safeguard the interests of the principal.

Final Remuneration. The amount of remuneration which the PSO will allow to be used to calculate maximum benefits from a pension arrangement. Can be defined as:

1. Basic salary for any twelve months out of the five years before the retirement date, plus the average of any fluctuating earnings over a period of at least 3 consecutive years ending on the same day as the Basic Salary.
   

2. The average of total earnings over any period of 3 or more consecutive years, ending in the last 10 years before the relevant date. (This method must be used for Controlling Directors and members earning in excess of £100,000, in any year since 5 April 1987).
   In addition, the Finance Act 1989 introduced an earnings cap for all post-14th March 1989 members.

Final Salary Scheme. A pension scheme providing pension benefit by reference to the scheme member’s salary at or near retirement.

Finance Leasing. A lease where the lessor aims to recover capital expenditure and related costs during the lease period.

Financial Accounting. General terms covering preparation of the ‘ordinary’ business accounts i.e. balance sheet, profit and loss account and related notes and statements.

Financial Adviser. A person offering financial advice. There are two types of adviser; those who offer advice based on the sale of the products of a single company (tied agents or company representatives), and those who select the most suitable product from those available in the market. See Category 1 Member.

Financial Intermediaries, Managers, Brokers Regulatory Association. An SRO in the regulatory hierarchy, one to which Independent Financial Advisers could become registered prior to the PIA.

Financial Services Act 1986. An Act of Parliament which introduced a system of self regulation for investment related business as it relates to the public. The Act came into full force in 1988.

Financial Services Authority. (FSA) Regulator established in 1997 to replace SIB. Will become fully operational when it receives its full powers on N2 date. A single independent non-governmental body which exercises wide ranging statutory powers governing the financial services and banking sectors.

Financial Underwriting. Underwriting in general is concerned with assessing the risk that a proposal represents to the insurance company. Part of the assessment involves the health hazard. Equally important is assessing the moral hazard attached to a proposal, part of which requires a question to be asked along the following lines: 'Given the circumstances outlined and the information provided, is the sum assured in question disproportionately high in the light of lifestyle/business requirements'. i.e. is there deliberate over insurance, and why.

Financial Year. Financial years run 1/4 to 31/3 and are identified by the calendar year in which they commence e.g. financial year 1995 is the year to 31.3.1996.

Firm. Generally used in the context of referring to a business or partnership; not a limited company. Also used in the sense of steady, finalised e.g. firm offer.

First Death. An option under a joint life policy is to have the policy proceeds paid out on the first death of the insured persons.

Fiscal. Relating to tax e.g. fiscal year, fiscal policy.

Fiscal Year. Period of twelve months for the purpose of tax calculation; in the UK the fiscal year runs 6th April in one year to 5th April the following calendar year.

Five Day Trading. The settling up system for buying and selling shares on the London Stock Exchange i.e. payment within 5 days of the trade; production of share certificates in the same time. Voluntary system, due to become three days in 1998.

Fixed Asset. An asset (e.g. machinery, plant) used by a company on a long term basis.

Fixed Costs. Costs that do not vary as the level of business activity changes e.g. rent, some insurances.

Fixed Rate. Unchanging, not subject to movement or fluctuation, usually for a specified term. e.g. fixed rate mortgage, where the rate reverts to the normal variable rate at the end of the fixed period.

Fixed Revaluation Rate. The rate at which a Guaranteed Minimum Pension can be revalued when contracted out employment ceases up to State Pension Age. One of 2 (was originally 3) revaluation methods, the other being S148 (previously S21) orders. The ability to revalue on a limited basis ceased on 6th April 1997.

Flexible Mortgage Account. Combined mortgage and current account whereby the whole of one’s salary is paid into the mortgage account using it as an ordinary current account.

Flexible Trust. One under which the settlor may change the beneficiaries to the trust property, or the way in which the property is divided.

Float. In monetary terms, cash used for running expenses.

Floor. In business terms, the lowest acceptable level of trading and exchange.
See ‘Cap’.

Flotation. The open sale of shares in a company ‘going public’, rather than the issuing of shares in a private company start-up.

Flow Chart. A visual explanation of an activity using diagrams. Each action is represented by a shape which leads on to the next related action or actions, each shape attached to the next by a line to denote the flow of the activity.

Footsie. The Financial Times Stock Exchange 100 Share Index, generally abbreviated to FT-SE 100. The index reflects the change in the value of shares of the top 100 companies traded on the London Stock Exchange.

Force Majeure. Events outside the control of the parties to a contract, which may have effect on the contract. Some contracts may contain a specific clause allowing for such events, and which determine what should happen in such circumstances.

Foreclose. To acquire the security for a loan if the loan cannot be serviced or repaid.

Forfaiting. Rather like factoring for exporters, in that a third party, the agent or forfaiter, purchases a bill of exchange at a discount and collects payment in full from the customer.

Formula Related. See ‘Final Salary’, ‘Defined Benefit’.

Fortune 500. An annual list of the 500 largest US companies, published in Fortune magazine.

Forward Pricing. Price quoted for units where the manager arranges the underlying assets after the investor applies for the units. The price reflects the future or rearranged asset valuation.

Forwardation. See ‘Contango’.

Four Ps. Conventional approach to marketing, namely:

Product
Price
Place
Promotion

Franchise. A licence to trade using an existing business name. The initial licence and start-up stock is purchased for a lump sum, and an ongoing commission is paid to the licenceholder on trading turnover.

Franked Investment Income. Dividend income received by corporate investors which, because corporation tax has already been paid on it by the distributing company, will not attract additional tax in the hands of the investing company.

Free Cover. Usually relates to group employee benefit schemes (life assurance, PHI) where an element of protection is offered without the need for medical evidence.

Free Standing Additional Voluntary Contribution (FSAVC). A stand alone AVC operated outside the main pension scheme, and available to all active occupational pension scheme members, except controlling directors.

Freehold. Complete ownership of land, held in 'fee simple absolute in possession' i.e. not likely to end on death or after a time (fee simple); unconditional (absolute); the owners rights are immediate (in possession).

Freight Forwarder. Person or business who arranges documentation and travel facilities for companies despatching goods to customers.

Friendly Society. A mutual benefit organisation having the main aim of providing maintenance and relief to members during sickness and retirement. Their tax advantages enable them to offer tax effective policies, but for limited premium levels only.

Fringe Benefits. Extra benefits, available to some or all employees, on top of salary e.g. staff restaurant, pension scheme. Also termed ‘Perks’, which is a shortened form of perquisite.

Front End Loading. One of the reasons for heavy penalties if a life or investment policy is cancelled in its early years, is that often the expense of selling and setting up the policy is recouped by the insurance company in the first year or two of the policy. This method of expense allocation is called front end loading.

Fund. Money set aside and earmarked for a specific purpose e.g.

1. Pension fund - money set aside to accumulate for retirement.
   

2. Sinking fund - money set aside for the repayment of a loan.

Fund Links. With unit linked investment policies it is often possible to spread the premium or investment between a number of funds linked to the policy.

Funded Unapproved Retirement Benefit Scheme. The 1989 Finance Act allowed unapproved pension schemes to be set up to provide benefits in excess of the 'normal' benefits for approved schemes. Both types may now run in tandem.

Funding Rate. See ‘Contribution Rate’.

Fungible.

1. A security which can be exchanged for another of a similar, or the same, type.
   

2. A fungible asset is one which is so similar to another as to be indistinguishable.

Futures. An agreement to buy or sell commodities, shares or currency at a future date for a price fixed today. Futures traders do not intend to take delivery of the subject of the contract, but try to buy or sell contracts in anticipation of their value increasing or decreasing.

Futures and Options Fund. An authorised unit trust which can invest a limited amount of its fund in derivatives. A Geared FOF may invest a larger proportion into derivatives.

Future Value. The value at which a sum of money invested now will grow when invested at a given rate or rates of interest during the period. See Current Value and Present Value.