Think about the conversations you have with your current and prospective clients. They may nod, smile, and comment at the right times, but do they really understand everything you’re saying? We’re not talking about smarts. Your clients are bright and successful folks.
It’s up to the financial professional to set the stage early by gauging clients’ knowledge of investments and terminology. It can go a long way to help financial professionals communicate more effectively.
Many in the financial services business may not realize it, but even the most common financial terms can be confusing. For instance, when you say “fixed income,” investors may hear “a paycheck in retirement.” In discussions about asset classes, clients might think you’re talking about instructional courses about assets.1 It doesn’t take many misunderstandings like that to thoroughly confuse an investor.
Other financial jargon may have negative connotations for investors. According to Rebuilding Investor Trust 2, a 2012 survey of investors with at least $100,000 in investable assets outside workplace retirement plans, words that imply uncertainty — such as “fluctuating,” “fee-based,” and “variable” — tend to have negative associations.
This research is a great reminder for us all to speak and write simply. Put yourself in your clients’ shoes and take a fresh look at your communications. Take out the jargon. The extra effort can lead to more informed, satisfied, and loyal clients.
1 Source: Ologie, 2013
2 Northstar Research Partners and Sullivan, March 2012
Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc.