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.