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.”