One of the issues advisors have in building client relationships is the tendency to use industry jargon during meetings.
Even with more sophisticated and experienced clients, it's never safe to assume they fully understand industry terminology.
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It’s all too easy for clients’ eyes to glaze over when we use investment jargon. Using plain English ensures clients understand risks, helps you manage their expectations, and helps you connect with them on their terms (pun intended).
Not only that, but using industry jargon is a big turnoff for many clients. It puts you on a different level and, although you may tell them you sit on the same side of the table with them, you still won’t be speaking their language.
Here are eight phrases that should be avoided in client meetings and some examples of how to replace them.
1. Accumulation phase. Clients understand this to mean their working years. Distribution phase is the other side of things and it’s a phrase that also should be avoided. It really isn’t difficult to use phrases like ‘during your retirement savings years’ or ‘when you start living off your funds.’
2. Active management and passive management. Clients view involvement in the markets as active. So these phrases should be replaced with ‘trying to beat the market’ and ‘trying to match market performance.’
3. Longevity risk. Simply explaining that a client might outlive his or her money is an easy substitute for this phrase. It is also one that will avoid confusion.
4. Estate planning seems like a straightforward enough phrase but there are so many aspects involved in the phrase, it might simplify things just to talk about the plans your client wishes to make to disburse his or her assets to heirs or philanthropic entities.
5. Market volatility and diversification. Again, these are not the most offensive phrases. But they can be more confusing than we might think. Simply referring to changing market values or investing in a variety of companies or categories is much more straightforward.
6. Large cap, mid cap, and small cap. Why not just say large, mid, and small size companies?
7. Trading costs and expense ratios. These are really investment expenses and the costs of investing in a mutual fund or other structured product.
8. Equities and fixed income are stocks and bonds. Pure and simple.
You may want to try substituting phrases for these terms in your client meetings. You may be surprised how much more open your clients may be and also at the improved level