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Words And Phrases Advisors Should Avoid

When offering a market perspective or sitting down with a client for a portfolio review, word choice can make all the difference. Yet much of the language that has become commonplace in the investment industry does not resonate with clients. Ramble on about a complicated investment product, for example, and clients’ eyes may glaze over. Worse, some terms that advisors are accustomed to may be unintentionally communicating a negative message, particularly following the 2008 market collapse.

“Sometimes advisors can be so wrapped up in trying to sound real intelligent by using these words or phrases that have been thrown around so many times that they no longer mean anything," Carrie Rosen, branch director and financial advisor at RBC Wealth Management, said. "This can result in the client really tuning out completely."

Click through for a list of words Rosen personally avoids (and suggestions for what to use instead) as well as some tips provided by Dave Saylor, executive director of Invesco Consulting.

These adjectives do not really mean much for clients, Rosen said.
“We don’t have to use risk on, risk off,” Rosen explained. “We’re conservative or we’re in the market, and that can be both.”

It makes it sound to clients like they will never make any money in the money markets, Rosen said. The term implies a cyclical downturn is going to last a lifetime.

“It’s so over-used,” she said. “And it sounds like we’re never ever going to go back to the way things were before.”

Turnkey, a word designed to make things sound easy, may over simplify what you are trying to say or make your strategy look too easy, according to Rosen.

“Turnkey sounds like we’re putting clients in a box rather than creating a plan tailored to their goals,” Rosen said. “It’s way too automatic.”

"How do you know I have a problem!?" retorts Dave Saylor, executive director of Invesco Consulting.

This is a word that has fallen out of favor since the financial crisis when many clients saw the “solutions” their advisors promise did not pan out, said Rosen. Instead, Rosen suggested using the word “Strategy.”

“If we’re using instead a strategy with a goal in mind, and they’re constantly working toward it, its’ something that’s more doable, something they can get their arms around,” she said.

Most of Rosen’s clients are retired. Her goal is to draw income without touching the principle, and “as long as that’s what happening we don’t need fancy terms,” she said.

She uses the term standard deviation with her clients, but makes sure that they understand why she is telling them about it.

Saylor recalled a partnership with a money manager whose tagline was transparency.

“Clients don’t know what the benefit is to being transparent,” Saylor said. “The contract is transparent, but that doesn’t mean they’ll be able to understand it.”

According to Invesco’s poll 20% of clients prefer a fee arrangement that is “Transparent,” compared to 58% who prefer one that is “Straightforward.”

As portfolios show signs of improvement, don’t phrase it to clients as a “recovery strategy,” Rosen cautioned. Instead, look towards couching investments in a “long term strategy.”

From “putting all your eggs in one basket” to “diversification,” Rosen said this phrase has evolved to be somewhat cliché despite its good intentions.

Rosen and Saylor agreed that advisors should be clearer about what they mean if they are going to use this term.

“Diversification is just a keyword,” Saylor said. “If you start with diversification, then get into the finer points.”

Rosen doesn’t have a huge problem with the word, but she generally avoids it. She said the word oversimplifies clients’ life savings and how much the money that they are talking about is really worth.

A poll by Invesco reported that only 17% of respondents were satisfied with calling their savings and retirement income their “nest egg.” Fifty-five percent preferred “investment income” instead.

When offering a market perspective or sitting down with a client for a portfolio review, word choice can make all the difference. Yet much of the language that has become commonplace in the investment industry does not resonate with clients. Ramble on about a complicated investment product, for example, and clients’ eyes may glaze over. Worse, some terms that advisors are accustomed to may be unintentionally communicating a negative message, particularly following the 2008 market collapse.

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