Financial advisors have a lot to say to their clients -- but does any of it really get through?

As a discipline, financial advice by its nature involves technical language that is difficult for the layperson to understand -- but adding to the challenge, advisors and analysts have constructed a confusing lattice of acronyms, shorthand and slang that can obfuscate what they’re trying to say.

Paul Blease, director of Oppenheimer Funds’ CEO Advisor Institute, likens an advisor’s speech and language to a physician’s bedside manner.

“Bedside manner is a critical component of success when a doctor works with patients,” says Blease. “Can you communicate complex and sometimes frightening concepts using common language along with analogy, metaphor and story to convey what’s going on to a layman?”

Advisors should leave many of the technical terms they use to describe markets and investments behind when dealing with most of their clients, says Blease -- meaning terms like alpha, beta and efficient frontier should not be used.

Mere word choice and sentence construction can have measurable impact on client behavior, says Brie Williams, vice president, head of practice management, at State Street Global Advisors. (Williams will be speaking at Financial Advisor's upcoming Invest In Women conference.)

“Word choice matters; studies show that it can make a big difference,” says Williams. “The act of turning a noun into a verb shows us how powerful it can be -- it’s not that you save for something, but that you are a saver. It’s not that you help someone, but that you are a helper. When we do this to verbs, we make the action part of a person’s identity, creating a more positive connotation that can lead to action.”

Financial jargon not only makes it more difficult for advisors to serve their clients, but it can also act as a barrier to receiving financial advice. According to a study released in February 2017 by Merrill Lynch and AgeWave, 65 percent of Americans over the age of 25 believe that the language of finance is confusing or not user friendly.

John Anderson, managing director for practice management solutions at SEI Advisor Network, says that advisors are too insulated and have to try to talk about finance in the public more often.

“The more you’re out talking to a general audience instead of staff members and to prospects or friends instead of clients or coworkers, the easier it will be to translate technical jargon to everyday language,” says Anderson. “We spend too much time on the phone with our colleagues, too much time in front of the computer -- the rest of the world doesn’t sound like we do when we talk about money.”

It doesn’t help that financial advisors can’t settle on what to call themselves, says Anderson, or how to spell “advisor” in the first place -- do they go with the spelling from the 1940 Investment Advisers Act, or adopt the more contemporary spelling of Financial Advisor magazine?

Advisors also have to balance simplifying complex concepts with the need to appear professionally well-informed in front of their clients.

“If the advisor cannot demonstrate some value by sounding intellectual without sounding unapproachable, they’ll lose the client,” says Anthony Stich, director of global marketing at Advicent. “You still have to sound smart. This paradox harms today’s younger financial advisor, as the same attributes that signify age also signify wisdom. It’s better for them to use accurate, intellectual language.”

However, advisors must also limit their intellectual language, says Carolyn McClanahan, director of financial planning at Life Planning Partners, a Jacksonville, Fla.-based RIA.

“I think too many advisors are already trying to impress clients with their knowledge,” says  McClanahan. “They already know that we know what we’re doing; that’s why they’re our clients. The best way to impress then is to show that we really care about them and are interested in their goals.”

These were some of the worst-offending financial advice buzzwords, according to some industry experts:

EQUITIES, STOCKS, or COMPANIES

“I stay away from the term equities; a lot of people don’t know that equties are stocks,” says McClanahan. “We need to avoid going into very technical explanations about the markets and their constituents without knowing whether, one, the client actually wants to hear those things, and two, whether the client is going to understand what we’re saying.”

Changing equities to “stocks” might not cut it for many clients, says Blease, and advisors should be careful that they might turn concrete assets into abstractions with their terminology.

“I don’t talk about stocks, I talk about companies when I build a portfolio,” says Blease. “I want clients to know that they’re owning companies, not just stocks.”

BASIS POINTS or BPS

“For the investor, it’s better for the advisor to talk in terms of actual dollars than that of basis points,” says Williams. “Fewer than one-third of investors understand the advisory fees that they’re paying, so most clients aren’t going to grasp what the basis point is.”

ASSET ALLOCATION

“Talking about asset allocation is still too much information for our average client,” says McClanahan. “We talk about riskier assets versus safer assets, bringing it down to a very basic level -- but before we talk about investments at all, we discuss their financial plan.”

TAMP

Explaining TAMPs, or turnkey asset management platforms, to clients can be awkward, says Stich.

“Essentially, you’re stuck explaining to them that technology is doing the job that they thought you were doing for them,” says Stich. “Even explaining something like a fund or an ETF can turn an advisor down that road. These discussions should be had in the context of an advisor’s value proposition.”

VOLATILITY

“The first time I heard the term volatility, I thought immediately that the market had dropped,” says Stich. “Probably best to avoid technical descriptions of volatility like standard deviation. Terms like ‘correction,’ ‘plummet,’ and ‘drop’ don’t do us any favors, either -- when does a drop become a plummet? Do clients know the difference?”

Volatility is too often taken to mean declines in the value of an investment or an asset class, says Stich, when more accurately it refers to both positive and negative price fluctuations within a specifc perod of time.

RISK

“Especially when we’re talking about risk-related claims, they can be very confusing to clients if we’re not providing quantitative comparisons between investment choices,” says Williams. “Help the investor hone in on specific risks that count most for them, put it in context for the individual investor, and then the conversation becomes healthier for all involved.”

Anderson says that advisors should delineate between risk and volatility -- risk being the chance that an investment doesn’t perform as expected over an entire investing timeframe, while volatility refers to the intermittent up-and-down movement of an investment’s value.

MONTE CARLO SIMULATIONS

“Monte Carlo is more than a Mediterranean gambling hotspot,” says Stich. “How do you explain to clients that it’s a randomized modeling technique and that you’re not thinking about taking their money to the roulette wheel? It might be best to just tell clients that you’re providing them with a level of simulations for how your money may be impacted by the market over time.”

INVESTMENT RETURNS

“I’m not sure that it’s helpful that we talk to clients so much about historical returns in particular,” says Blease. “The biggest challenge to most investors is not the returns of any particular asset class, but their behavior. The biggest threat to your long-term investment success isn’t the advisor, or the fund manager, or the management of the companies they’re invest in. It’s you.”

HEADWINDS AND TAILWINDS

Often used to describe favorable or unfavorable market conditions for particular classes of investments, Williams says the terms add unnecessary complexity to advisors’ language.

“If tailwind means something’s a good investment, then simply say so,” says Williams. “Then you have to share the rationale behind that classification and personalize it for the client. An investment shouldn’t be merely good or bad in the context of helping a client, and terms like headwinds and tailwinds don’t add anything meaningful to the conversation.”

FIDUCIARY

“Fiduciary isn’t technically part of the advisor’s jargon, but it’s out there now,” says Stich. “Clients are starting to ask advisors whether or not they’re a fiduciary at a time when most people are still unfamiliar with what a fiduciary is – advisors should be prepared for that issue.”

At SEI, Anderson believes that “fiduciary” should be used more in conversations with clients  and the general public.

“The public isn’t hearing fiduciary enough yet,” says Anderson. “Advisors might not be using the term as much as they should.”