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“My words fly up, my thoughts remain below. Words without thoughts never to heaven go.” – William Shakespeare, from Hamlet.
Advisors use a lot of words that are industry jargon. That is fine because we know precisely what they mean. It is the internal language of investment and financial professionals. I’m talking words like equity, income, or fixed income. Fancy CFA® or CFP® words.
Some clients understand, but many do not. For a lot of people, income means any return on investment. They truly do not distinguish between interest, dividends, or growth. And they surely do not distinguish between the stabler growth of fixed income or the volatile growth of equities. Hand this paragraph to a client and ask them what it means!
Do they understand simpler terms like stocks or bonds? Somewhat more. Maybe not precisely, but there’s less confusion. Want to see their eyes glaze over? Run these by them:
Income, fixed income, income stocks, income REITS, income funds, income index funds.
Again, we understand, but they won’t.
Check my college transcripts (on second thought, maybe not) and you will discover that English and literature classes were my passion. Oh, my degree is in business and marketing, but my top scores were in the letters. I may be the only advisor you know with an A in a 400-level Shakespeare course!
Here is my literature-focused marketing point: We communicate better with our clients when we stay away from industry jargon. Explain things the way you would talk with a child. Keep it simple, and only go to the complexities when it is necessary for them to understand. Do not be condescending, but use simpler words in bite-sized chunks.
Important tip: If we stop using the wrong words among ourselves, we will stop using them with clients.
In my days in a bank trust department, I worked with a talented man who led our investment group. We would ask him to write a few paragraphs or more for a newsletter or other client message. Bless his heart, he knew the right stuff. But it sounded like an economics textbook – a bad economics textbook. He would get defensive and angry at my edits, but the point was not to sound smart. The point was to explain. Readers would never get it if they could not understand it.
Other industry words are important for distinct reasons. “Model” is a horrible word for consumers … it implies conformity and commonness. No one – no one – wants to be common.
The word “model” is popular in the investment industry because it means “easier.” If we can manage your portfolio with models, it will be easier and more profitable for us. That is completely valid as a business reason.
But that’s also an awful client message: “We’ve built models for our clients because it is easier and more profitable. I hope you don’t mind that your portfolio looks just like your neighbor’s … and my daughter’s college account, and the local motorcycle club.”
We do not want belly-button cars and we do not want belly-button portfolios. No one does. So, let’s stop saying it!
The same is true about the term “mutual funds.” Ugh. People think that means conformity and commonness. That is one reason brokers pitch individual stocks; the story is better, and a portfolio of individual stocks (no matter how bad) feels more customized than a few mutual funds.
If we stop using the wrong words among ourselves, we will stop using them with clients.
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Bad words: Equity, income, mutual funds, ETFs, indexes, fees, models. Any industry jargon.
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Better words: Stocks, bonds, real estate, managers, templates, custom, deliberate diversification. Anything that implies personalization.
I understand that many advisors and firms do not worry about nuances like this and that they do fine anyway. But I was never content to line up with other firms or advisors … being ordinary is not what clients want, either. Ordinary is a belly-button business model.
“Mind your speech a little lest you should mar your fortunes” – William Shakespeare, from King Lear.
Clients want to understand, and we need them to understand; that’s why words matter so much.
Dan Danford, CFP® is founder/CEO of Family Investment Center in St. Joseph, Missouri. He learned early ideas about money from his late father, Thad Danford, who charged rent on the family lawn mower while Dan cut neighborhood lawns. Danford is a practicing investment advisor and author of Happy to be Different: Personal and Money Success Through Better Thinking.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.