Like most industries, financial services has its own jargon – a lot of it.  The problem is that it creates a barrier between those within the industry and those that they are supposed to be serving – everyday investors, superannuation members and so on.

The use of unclear expressions and jargon only leads to confusion. Some expressions even seem to have different meanings each time they are used, and often these meanings differ from consumers’ own understanding.

The result is that people can find it difficult to know whether the information being provided to them is relevant, and what they need to do about it.

It doesn’t even need to be highly technical or obscure jargon that can cause problems.

For example, take the term “high-net-worth individual”. The most common reference seems to indicate people with more than $1 million in investable assets. But not always. Others say $750,000, $1.2 million, or even $1.5 million. Sometimes the definition is $US1 million in investable assets, just to add to the confusion. One definition we saw recently suggested $30 million. Perhaps these are people best described as “ultra-high-net-worth” individuals (or UHNWI – yet another piece of terminology for investors to come to grips with). Other definitions of “high net worth” seem to take income into account, as well as assets.

Another example is an article we read a little while ago that talked about “elderly” investors. To us, elderly refers to those well and truly in retirement – probably in their70s if not 80s. However, as we read on, we realised that the article was in fact talking about people in their 50s and 60s who were still working and saving for their retirement.

Obviously, it would be far less confusing for consumers if everyone meant the same thing when using such expressions. But if a commonly accepted meaning isn’t available, some clarity about what meaning is being adopted should be provided in communications.

If there is room for any confusion or lack of understanding, the best approach is not to use fancy terminology or jargon at all, and simply explain what is meant. It doesn’t have to be difficult. For instance, instead of “high-net-worth individuals ”, say investors with more than $1 million in investable assets”. Instead of “elderly”, say “investors over 75”. That way, people know what you’re talking about. And isn’t that the point of the communication in the first place?

Some more examples of industry language that could be better defined – or even done away with entirely – include:

• Investment risk. To investors, risk almost always sounds like a bad thing. This doesn’t have to be the case.
• Retail and wholesale (when used to describe investors). Consumers don’t think of themselves as retail, and nor should you refer to them as such.
• Foreign ATMs. We’re not using an ATM in another country, just the ATM of another bank. Why not refer to it as such?
• Balanced portfolio. Considering some “balanced” options carry most of its holdings in equities, this can mean many different things to different investors

If more Australians are to be encouraged to take control of their retirement savings, gain financial literacy and seek professional advice and investment assistance, the financial services industry must do a better job of communicating, in the language and style that Australians understand.