Financial jargon confuses Americans

Advisors know they operate in a sometimes difficult-to-understand industry, with its specialized products and the language that surrounds them. The average American doesn’t understand all of the lingo that pervades the financial services industry and it costs them time and money.

AARP Financial Inc. surveyed Americans about financial jargon and found that, among other things, more than half (52 percent) said they had made an investment mistake because they were confused or didn’t understand an investment. Fifty-four percent said they don’t read financial literature because it is too difficult to understand. More than eight out of 10 respondents said their car insurance policy was easier to understand than a mutual fund prospectus; 79 percent find it easier to read prescription drug inserts.

Fewer than 33 percent said they understood terms like basis point, expense ratio or index fund well enough to explain them to someone else, yet those are the terms used to describe financial vehicles. Maybe that’s why 67 percent gave the financial services industry a C, D or F grade when it comes to explaining saving and investing to consumers.