Published Articles

Jargon Damages Advisor Client Relations

SuperUser Account posted on May 25, 2011

By Gregory Shulas May 12, 2011

Advisors risk losing business when they use too much financial jargon in their discussions with clients. That’s according to a majority of FundFire poll respondents.

Roughly 83%, or 100 voters, said the excessive use of advisor-speak is turning off clients and damaging business. That made it the top sentiment expressed in a FundFire poll asking readers whether advisors harm relationships by using industry terms such as “alpha” and “tactical asset allocation” while in discussions with clients.

The majority tally included 64%, who believe jargon has done a “fair share of damage” to relationships, and 19%, who said jargon can be an absolute “deal killer.”

In contrast, just 8%, or 10 voters, did not consider jargon usage an issue. In fact, 6% said investors see the use of advisor-speak as a sign of expertise, while 2% indicated that clients are simply not bothered by jargon.

Meanwhile, 9%, or 11 voters, said the use of jargon doesn’t really impact the advisor’s success rate with clients.

The FundFire poll follows an Invesco Van Kampen Consulting survey that found that investors are frustrated by excessive advisor-speak. that survey suggested that investors would be happier if advisors use simple terms, such as stocks and bonds, and try to speak like the rest of the population.

Kip Gregory, founder of the Gregory Group consultancy, blames the slip into advisor-speak on the generally analytical and left-brain oriented nature of the advisory business.

“What advisors need to realize is that most people don’t live in your world, and you have to communicate in a language that most people understand,” he says.

 “Jargon pushes the client away and creates an unnecessary barrier… The most effective advisors translate terms into details that people understand,” Gregory adds. “They are great storytellers.”

Advisors who use too much jargon lack sales skills and ultimately struggle to articulate the main value behind an investment or tax strategy, says Rick Rummage, founder of The Rummage Group, a recruitment firm and consultancy that focuses on advisors.

“At the end of the day, they have to convince the prospect to take action on something. If the advisor is unable to articulate the value of a strategy, it can be harder for the client to take action,” Rummage adds. “One of the best things that an advisor can do is explain things to clients clearly, and also dumb down complicated topics so the client can comprehend them.”

The excessive use of jargon has also been a concern in the managed account industry, where terms such as the UMA (unified managed account) and UMH (unified managed household) pepper conversations.

Chip Roame, managing partner of Tiburon Strategic Advisors, has long said that terms like “UMA” do more harm than good for managed account sales and marketing efforts. Instead, client and advisor-facing professionals need to focus on the core client-serving objectives of products and services and make no mention of those acronyms, he has said.

As of 3 p.m. Wednesday, 121 FundFire subscribers had participated in the poll, which is an unscientific sampling of the publication’s subscribers. Readers could vote only once on a voluntary basis. FundFire’s audience includes financial advisors, asset managers, institutional investors and service providers.