Glossary of terms
Account
Individual wrappers within the Nucleus platform e.g. Onshore Bond, Isa, Pension.
Accumulation account
Under the Nucleus pension scheme funds are held in the (pension) accumulation account until they are needed
to provide benefits to a member.
Adviser
Independent financial adviser (IFA).
Aggregated trade
A process that allows multiple buy or sell orders placed by a customer to be combined into a single order for
transaction to ensure effective and fair execution.
Trade orders are aggregated daily for each asset in each account. This means that where there is a minimum
deal size, clients may benefit from being able to access an asset range that would normally be unavailable for
small purchases. However, it can also mean that if clients wish to sell, they may need to wait until sufficient
orders are placed to reach the minimum, making the asset fairly illiquid.
Using aggregation, Nucleus is able to transact on behalf of advisers and their clients in an efficient and cost
effective manner.
Alternatively Secured Pension (ASP)
A form of lifetime retirement income that can be established by an individual retiree at their 75th birthday from
monies held within an HMRC approved pension scheme, such as a Sipp.
A 'secured' pension, such as ASP, is an arrangement that ensures an income for the remainder of the
individual's lifetime and mitigates the risk of outliving the funds they have generated. In many cases, this is
achieved through the purchase of an annuity.
AML
Anti Money Laundering.
Annual allowance
The limit on how much tax-free pension savings clients can make in any one tax year.
Annuity
Most commonly a contract provided by an insurance company under which a retiree exchanges all, or part, of
their pension fund for an income for the remainder of that individual's life. In some cases, at least in part, this
includes the lifetime of a surviving beneficiary such as a spouse. Many annuities also provide for a 'guarantee
period' of five or 10 years to offer some protection to a surviving beneficiary against the annuitant's premature
death.
An annuity can usually be paid monthly, quarterly, half yearly or annually.
Asset allocation
The division of an investment portfolio between different asset classes.
Assets
Cash, securities, mutual funds and any other asset that may be held or traded within a client’s portfolio.
Auto-sell down
Automatic selling down of units to retain sufficient value in the cash account to pay Nucleus charges.
Available cash
Money available in a client’s account for placing a buy or withdrawal.
Balanced funds
Investments that offer exposure to a mix of asset classes, typically designed to mitigate risk through
diversification. For example, an adviser may use a balanced fund to meet a client's target asset allocation
based on a selected risk profile.
Benefit crystallisation
The act of converting accumulated investments held within a pension scheme into benefits. In the case of a UK
approved pension scheme such as a Sipp, these benefits may consist of up to 25 per cent of the pension fund
as tax free cash and a taxable income, either as income drawdown or the purchase of an annuity. Benefits
from UK pensions, such as the Sipp offered through Nucleus, are subject to rules and regulations imposed by
HMRC.
Benefits and income account
When benefits are used to provide income drawdown in the case of a pension the amount to be used is
transferred from the accumulation account to the benefits and income account.
Bid-offer spread
The differential, usually expressed as a percentage, between the purchase and sale price of an investment. The
bid-offer spread can most commonly be seen as the characteristic pricing structure of a unit trust. The
percentage difference between the two prices provides an indication of the initial – i.e. upfront – cost of
investing.
Bulk switch
Bulk switching enables advisers to switch assets for multiple assets using a single instruction.
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Business day
Any day on which the London Stock Exchange is open for business.
Capital Gains Tax (CGT)
A tax on realised gains or profits on real property, shares or other investments.
All gains up to an annual allowance are taxed at 0 per cent and a single tax rate of 18 per cent is applied on all
gains over and above the annual allowance. A CGT calculator is available on the Nucleus platform.
Ceding company
A client’s previous provider who then becomes the transferor of assets to Nucleus.
Citi code
Financial Express’ own internal code for each fund at unit level. They are created by FinEx and are widely used
throughout the industry.
Client
The individual on whose behalf the adviser acts.
Client advice fees
Adviser remuneration.
Client money rules
The client money rules set out in the FSA Client Assets Rules.
Closed ended
Investments which offer a fixed amount of shares in the fund to investors. A set amount of shares are issued
when the investment is launched and these shares can then be bought and sold on the secondary market. This
means that further shares cannot be created, or cancelled, by the investment manager, as is the case with
open-ended investments such as Oeics. Closed ended funds include Investment Trusts. The shares in these
investments trade on the London Stock Exchange, where the price is determined by supply and demand given
the fact that a fixed amount of shares are in circulation. As no further shares can be created the fund is known
as closed ended.
Corporate action
The act of making substantive changes to an investment, such as a collective fund or share. This may involve
changes to the name, features and structure of an investment, such as a company rights issue or a change of
fund type or investment strategy. Mergers, acquisitions or closures are also classed as corporate actions.
Current yield
The current value of interest distributions paid out by a bond (fixed interest security) or bond fund as a
percentage of the current market value; calculated by dividing the latest annual interest payment by the current
market price.
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Custody
The safekeeping of investments.
Custody records
Details of where and by whom investments are registered as well as where these records are maintained.
These records may be in respect of stock exchange traded investments such as shares, investment trusts and
ETFs or directly traded unit trusts and Oeics.
Historically, share or fund certificates declaring the details of the owner and holding were issued so that
custody rested with the individual investor. Today, very few 'physical' investment transactions take place;
therefore sales and purchases are settled and registered electronically. A nominee company typically holds
investments on the client’s behalf; this offers greater efficiency and security as well as being more cost effective.
Cut off time
The table below shows dealing times for all assets through the Nucleus platform.
Dealing run time
Who the assets are traded via
9:30am
Allfunds
10am
Stocktrade
10:30am
All other fund managers
3pm
Stocktrade
Trades placed after this time will usually be aggregated for the next day’s trade. In the instances where an
asset trades less frequently than daily, orders will be aggregated for that period and placed at the appropriate
time.
Declaration
A formal document which is signed by a client in relation to their portfolio.
Designation
If some or all of the accumulation account in a pension is used to provide income drawdown benefits, this is
known as designation.
Dilution levy
A levy which may be imposed by the investment manager of a collective fund, usually a unit trust, on large
purchases or sales. Where such transactions may create greater expenses for, or impose constraints on, the
fund that might disadvantage other investors; the dilution levy offsets any such effects and thereby ensures that
other investors are not disadvantaged.
Discretionary fund manager (DFM)
A third party with the permissions to invest on the client’s behalf.
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Dividend
An income, representing a share of net profits, paid by a company to its shareholders in return for their
ownership of part of the equity of the company. Typically distributed half yearly, although some larger
companies declare quarterly.
There is no obligation upon any company to declare a dividend. The rate of dividends will often indicate the
nature and style of a company. For example, companies targeting fast and significant growth will typically
declare very small or zero dividends, since their strategy will be to re-invest profits to aid growth. Conversely,
one of the main attractions to shareholders in well-established, profitable companies may be a regular,
steadily growing dividend stream.
Dividend yield
The annual dividends distributed by a company or equity fund, measured in percentage terms and calculated
by dividing the last year's annual dividends per share by the current share price.
Dual pricing
A pricing structure for an investment that provides for two prices, i.e. an offer price at which an investor can buy
shares or units and a bid price at which the investor sells them. The difference between the two prices is known
as the bid-offer spread.
Dual pricing applies to most unit trusts, but usually not to other open ended funds such as Oeics where a single
price structure normally applies.
DWP
Department for Work and Pensions or the relevant Government department (for pensions tax relief).
DXA
A secure document exchange service through which advisers can send mail to Nucleus Client relations.
Equity
A share of the ownership of a particular asset. In investment terms, usually related to a company share, sharebacked fund or property.
Exchange Traded Fund (ETF)
An investment fund tracking a sector or index that is traded on a stock exchange. An ETF typically trades at a
price which is very close to its net asset value, unlike an investment trust. This usually provides a higher level of
confidence that the price of an ETF very closely reflects the value of the investments it holds as well as the sector
or index it tracks.
Flagged assets
Assets that trade less frequently than daily, have minimum trade sizes, restrictions on when they can be
redeemed or sold, or any other features which Nucleus chooses to highlight on the platform.
FSA
A statutory body established by the Financial Services and Markets Act 2000 (FSMA), the Financial Services
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Authority is the single, independent regulator for the UK financial services industry.
For more information on the FSA, its statutory obligations and principles of good regulation, visit the FSA website
at www.fsa.gov.uk
Funds report
A report providing details of assets available on the platform and the preferential terms associated with them.
HMRC
Her Majesty’s Revenue & Customs.
In-transit assets
Functionality to help the process for transfers and re-registrations of assets on to the Nucleus platform.
In-specie transfer
The act of transferring assets from one investment platform or product wrapper provider to another, without
converting those assets into cash form. As there is technically no disposal of the investments, the investor is not
'out of the market' for a period of time whilst selling and buying.
In-specie transfer can be used to minimise transaction costs and for strategic or tax planning purposes.
Income limits
The limit HMRC places on the amount of income that can be taken from a pension each year. Commonly
known as the ‘maximum GAD’ it is calculated as 120 per cent of the basis amount or GAD limit. The basis
amount is calculated according to a formula set down by HMRC.
The maximum GAD limit will apply for up to five pension periods, unless there is a review.
ISIN
The International Security Identification Number (ISIN) is a global system used to uniquely identify equities and
other securities (such as bonds) traded on stock exchanges around the world.
Jira
Nucleus’ enquiry handling system through which users can raise issues to Nucleus, view existing issues that
have been raised (including history, status and subsequent actions) and receive notifications by email when an
issue is updated.
Key features
Document produced by Nucleus (and amended from time to time), which details key features of each wrapper
account and is deemed part of the terms and conditions of each account.
Life assured
Individual(s) whose life is insured under the terms of the policy, as specified in the policy schedule.
Lifetime allowance
The HMRC limit for the total value of all of the benefits built up in clients’ pension arrangements by clients
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and/or their employer (including investment growth). Above this limit sums are subject to a 'Lifetime Allowance
Charge' which applies in addition to the usual income tax due on pension payments.
Mex ID
FT Interactive Data‘s code for each fund at unit level. Created by FT Interactive Data, the coding system is
industry standard for UK funds.
Model portfolio self-service
A tool that enables IFAs to easily manage model portfolios across all their clients on the Nucleus platform.
Model portfolios
Functionality that allows advisers to use a choice of investment patterns and apply them to a number of
different client accounts. The model portfolio functionality includes the ability to rebalance portfolios on a
periodic basis and to switch the portfolio associated with a client’s account.
Nominee account
A custodial account held on a client’s behalf by a third party but established for the absolute benefit of the
customer.
Holding investments within a nominee account enables transactions to be carried out speedily, cost effectively
and helps to ensure comprehensive, up-to-date and robust record keeping.
Nucleus Isa account
A stocks and shares Isa provided by Scottish Friendly Insurance Services Limited, an HMRC approved Isa
manager, authorised and regulated by the Financial Services Authority.
Nucleus General account
A General account provided by Nucleus Financial Services Limited, which is authorised and regulated by the
Financial Services Authority.
There are no upper limits on how much clients can invest in the General account and clients can hold more
than one General account if required.
Nucleus General (gross) account
An account that allows clients to select and hold unlimited contributions in cash and a wide range of assets,
from those made available on the platform, in one account. In addition, the account allows eligible clients to
receive interest and income from assets held within the account without having tax deducted at source (gross).
Interest accrued on cash balances will also be paid to clients gross.
Nucleus Onshore Bond account
An Onshore Bond account provided by Scottish Friendly Assurance Society Limited, which is authorised and
regulated by the Financial Services Authority.
This account is a non-qualifying life assurance bond and can only accept lump sum contributions, there are
however no limits on how much may be invested.
It should be noted that higher-rate taxpayers who take income from or cash-in a non-qualifying life assurance
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bonds may be subject to income tax on the proceeds they receive.
Nucleus Offshore Bond account
An Offshore Bond account provided by Royal London 360 Insurance Company Limited, a member of the Royal
London 360 group of companies, which is authorised and regulated by the Isle of Man Government Insurance
and Pensions Authority.
This account is an offshore insurance bond consisting of a series of identical lump sum segments with no
specified term.
Nucleus Pension account
A registered Self Invested Personal Pension (Sipp) available on the platform.
Nucleus PR Pension account
A Protected Rights (PR) Pension Account which is incorporated into the trust-based Sipp.
For compliance reasons Nucleus must keep protected rights assets separate from the Nucleus Pension
account.
OBSR rating
A method of analysing and measuring the quality of investment funds based on qualitative principles.
OBSR (Old Broad Street Research) specialises in rating the universe of UK open-ended funds, i.e. unit trusts and
Oeics. The OBSR research team of qualified investment professionals conducts a proven, robust and
independent due diligence process where qualitative research, focusing on an investment manager interview,
is supported by quantitative analysis of risk and return statistics.
OBSR currently rates around 250 funds out of an estimated 2,500. This relatively low number is, in effect, a
result of the strength of the due diligence process so that the funds that achieve a rating may be viewed as
standing out from their peers.
More information is available at www.obsrfundratings.co.uk
Oeic
An open ended collective investment vehicle which enables an investor to manage risk through investment
diversification and the professional day-to-day management of a portfolio of assets.
An Oeic is established under company law and is run by a Board of Directors, which can be, and often is, a
single corporate director to whom the investment manager reports. Because the investment is open-ended, the
price at any point will always reflect the net asset value of the underlying assets held.
Order execution policy
Policy relating to the Nucleus Share Dealing Account, as amended from time to time, which may be viewed via
the platform.
Orphan client
When an IFA firm has ceased to act for a client but the client’s assets remain on the platform they are known as
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an ‘orphan client’.
Portfolio
All the assets held by Nucleus, or any provider of the accounts, on the client’s behalf.
Re-registrations
The process of allowing investors to transfer investments, typically authorised funds such as unit trusts or Oeics,
from one investment account or platform to another without the need for sale and purchase transactions. The
process allows investors to minimise transaction costs, avoid the risk of a period out of the market and avoid
any potentially disadvantageous tax implications of disposal and re-acquisition. (See also in-specie transfer).
Rebalancing
A function that allows advisers to correct positions in a client’s investment allocations which have been caused
by a movement in the market. Rebalancing allows advisers to move asset allocation back to what was
originally specified as part of an investment direction.
Rebates
Although all funds carry an annual management charge (AMC), any fund rebates (typically 50 per cent of the
AMC for retail funds) negotiated by Nucleus are credited directly back to the client’s account.
Redemption yield
The annualised rate of return on a bond (fixed interest security) or bond fund, assuming that the asset is held to
maturity, expressed as a percentage.
Redemption yield reflects not only the interest payments a bondholder will receive, but also the gain or loss at
maturity compared to the current price.
The income element is defined by calculating the current yield while the gain/loss element is calculated by
taking the difference between the current market price and the face value of the bond at maturity.
Reserved cash
When a trade has been placed, the allocated monies will show in the reserved cash until complete.
Review illustration
An illustration that is produced every twelve months for clients holding a pension that is in drawdown.
Scheme administrator
Scottish Friendly Insurance Services Limited (registered in Scotland number SC113007 with registered office:
Scottish Friendly House, 16 Blythswood Square, Glasgow, G2 4JH, a registered Pension Scheme Administrator).
Security of assets
Details the way in which assets are held within the Nucleus wrap and includes details Nucleus’ understanding
of the current levels of cover provided by the Financial Services Compensation Scheme.
SEDOL
The Stock Exchange Daily Official List (SEDOL) is the standard identification code for all securities trading on the
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London Stock Exchange and other smaller stock exchanges in the UK. A SEDOL code is made up of seven
alphanumeric characters.
Self Invested Personal Pension (Sipp)
A retirement fund held under HMRC approved pension rules that enables investors to hold a broad and
extensive range of investments within a tax-advantaged pension tax wrapper.
Although a Sipp is a form of personal pension, the invested assets are held under trust by the Sipp provider for
the benefit of the investor.
Single pricing
A pricing structure where a single price applies to both the purchase and sale of an investment. Single pricing is
the typical pricing structure of Oeics and most individual securities.
The fund manager will create and sell units to investors but also buy and cancel units at the same price. Any
upfront purchase, sale fees or charges are simply added to the single price to arrive at the overall transaction
cost. This is in contrast to dual pricing, which typically applies to unit trusts.
Over recent years, the single priced Oeic structure has grown in popularity with fund managers and investors,
not least because it is compatible with standard practice in other European markets.
Standard deviation
A statistical measure of variability, i.e. the degree by which an individual value may vary from an average or
from defined data.
In investment terms, standard deviation is used to analyse risk by looking statistically at the range of possible
returns that could be achieved from an investment or portfolio. A high standard deviation suggests a high
degree of potential volatility and therefore a riskier investment; a low standard deviation suggests the opposite.
Stock exchange
The market on which negotiable securities such as shares and bonds are traded.
Stocktrade
Nucleus’ chosen stockbroker. Stocktrade is the execution-only division of Brewin Dolphin Limited, a wholly
owned subsidiary of Brewin Dolphin Holdings plc that is quoted on the London Stock Exchange.
Structured product
A wide range of investment offerings with no single identifying feature but which can generically be defined as
'bespoke' investment vehicles. They may be individually designed or created as a mass market, retail product.
Although the products vary widely, they tend to be characterised by a combination of capital protection or
underlying guarantee with the potential for a higher return through exposure to a higher risk vehicle.
It is essential that the would-be investor reads and fully understands the (sometimes complex) terms and
conditions to understand fully the potential risks and returns on offer.
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Support section
Frequently asked questions are answered on this section of the Nucleus platform.
Switch
A switch is treated as a separate sell and then a buy. This means that before the buy transactions are placed all
the sell transactions need to be completed and settled or, in other words, the buy transactions are not prefunded.
A switch can take eight days to complete and the confirmation price for the buy will be at the day of the trade,
which could be four days after the sell part of the switch.
Tax free cash
Old name for pension commencement lump sum (PCLS).
TCF
The FSA’s Treating Customer’s Fairly initiative, relevant FSA rules and principles.
Top-up
Adding additional monies to an existing client account.
Total expense ratio (TER)
A percentage figure that is indicative of the proportion of a fund's assets consumed by all the annual costs it
incurs. TER provides a more accurate and robust picture of the overall cost of managing the investor's money
than the more commonly quoted annual management charge (AMC).
However, it is important to note that even the TER does not capture the entire costs of a fund:
•
It excludes the (admittedly highly variable) initial charges.
•
It does not take into account broking/dealing costs or the potential impact of 'market costs', (especially
for a larger fund, the impact that its trading in a particular share or bond might have on the price of
that security).
Reduction in yield (RIY) figures can be used instead of TERs (and are used in tables which compare investments).
RIY is similar to TER, but the latter is more widely accepted globally and does not attempt to include problematic
initial management charges.
Transfer
The moving of the administration of a client’s assets from one company where they were previously registered
(the ceding company) to another.
In a transfer, the underlying assets held by the institution are sold down as cash and the underlying cash is
then transferred to Nucleus. This is often the case for Isa and pension accounts, although these can also be
transferred in-specie.
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Uncleared cash
If a cheque has not cleared or if Nucleus is awaiting settlement on a particular trade, this is known as
‘uncleared cash’.
Unit trust
An open-ended collective investment vehicle, enabling an investor to manage risk through investment
diversification and the professional day-to-day management of a portfolio of assets.
A unit trust is established under trust law and is run by a Board of Trustees to whom the fund manager reports.
Because the fund is open ended, the price at any point will always reflect the underlying net asset values of the
underlying assets.
Unsecured pension
A pension which is in drawdown (where income is being taken).
User
Adviser or other individual who is authorized by the intermediary firm to use the Nucleus system.
User guide
A guide produced by Nucleus (amended from time to time) providing instructions on how to use the Nucleus
platform.
View correspondence
Advisers can view all correspondence issued to client’s via the view correspondence feature on the Nucleus
platform.
Volatility
A measure of the range or degree to which the price or value of an investment could change over a specified
time period.
In investment terms, this is defined as the standard deviation of price changes of the continuously compounded
returns of an investment over a specified time period. Technically this is also described as 'historical volatility'
because it captures volatility based on a statistical analysis of historical returns.
Wrapper (or tax wrapper)
Name given to individual accounts e.g. Isa, Offshore Bond, Onshore Bond.
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