“We’re persuaders, it’s what we do, and persuasion is nothing more than the transfer of confidence.”
Invesco PowerShares’ Scott West took the stage at Curian Capital’s top advisor conference in Chicago on Wednesday to share what he’s discovered in his recent study of language, risk and client behavior.
“We’ve been working on it for the past for the past 18 months, and it’s largest study of its kind in ever in financial services,” West said.
He began by noting the various ways the financial services companies inform people of risk, and their marketing efforts in particular, before turning to disclosure.
“We take this small print, this mice type, and we’ve now found ways to make it even smaller, which does nothing more than scare clients,” he said.
West added that although advisors like risk, “after all, there is no alpha without beta,” you could substitute the word risk with radioactive, and “that’s how your clients feel about it.”
“How well would it work if you told them you’re trying to limit their exposure to radioactivity?” he rhetorically asked before answering, “Not well.”
He said that risk is not just about what you do, but what you don’t do; it’s an act of omission as well as commission.
“Do you have a client that might not be doing anything at the moment?” he asked to emphasize his point.
He then moved to a specific discussion of language, noting that “words matter” and listed some words that work better than others with clients.
“Use personalized versus customized,” he began. “The latter is overused and has been hijacked. Clients think, “What, you’ll customize my plan just like you’ll customize every other client’s plan?”