Watch your language.
A phrase that dates back to many of our childhoods still applies to us today, according to the 2015 Power of Alternatives study by Invesco Consulting and Maslansky + Partners, which bills itself as a “research-driven language strategy firm.” The research project aimed to find what language “works when talking to clients about alternative investments.” It collected data over the course of a year via advisor interviews and focus group dial sessions, as well as a national survey of 800 investors.
What emerged was that investors are often turned off by the buzzwords and commonplace jargon that advisors use. It’s not just that investors don’t like the word choices of advisors, it’s also that they don’t always understand that there are different terms for similar products. For example, the study found that 80 percent of investors “would rather invest in alternative mutual funds bought and sold like any other fund than liquid alternatives, yet they are the same thing. This demonstrates that investors do not have a good understanding of liquid alternatives,” according to Scott West, head of Invesco Consulting.
Advisors often want to speak to the higher level that they think investors will understand. In reality, most clients are just not familiar with the nuances of investment-speak. This is not a problem unique to the financial community. In fact, even federal employees (from a wide variety of agencies and specialties) have formed a group called the Plain Language Action and Information Network (PLAIN), whose lofty goal to is to “promote the use of plain language for all government communications.” They instruct (in clear and precise language, of course) that “using simple and familiar words wherever possible doesn’t insult your readers’ intelligence … [when the message] itself is complex … you want to make sure readers act as you hope or intend” – a solid reminder for advisors as well.