Double-talk: The Use of Jargon Confuses Investors

Growing up in my family, like any family, had its ups and downs.  My fondest memories were our trips to the beach.  For many summers, we traveled to North Wildwood, NJ to spend a few weeks by the ocean.  Eventually, everyone got jobs working at the beach and we stayed the entire summer.  My first job was as a 12-year-old stock boy at a beach grill and sundries store.  I got promoted to grill boy at 15.  I was moving up in the world.

While on the boardwalk, to my extreme embarrassment, my father would approach anyone dressed in religious habit (clothing) male or female to engage them in conversation.  What I didn’t understand at the time was that he was merely showing respect for their devotion to service.  On the other hand, when he didn’t respect someone, usually self-proclaimed experts, he subtly trolled them by using double-talk. 

Double-talk, or gobbledygook, rigamarole, or whatever you’d like to call it is a lost science in most of society (except for politicians of all stripes).  It’s the ability to engage in a conversation while saying a lot of nothing.  It was popular in the olden days of Black & White movies.  Here’s a pretty good (short) example of it:  https://www.youtube.com/watch?v=NzcE0G_OMDA

My father would throw out words like “fourdastandontherealasprill” sandwiched between actual words and the “expert” would nod in agreement.   I still smile when I think of it. 

The modern version of double-talk is jargon.  For the uninitiated, jargon can be confusing and deceptive.  Unfortunately, jargon is rampant in the investment industry.  Much of it is not malicious and just the result of insiders taking a shortcut to talk to other insiders.  Of course, when it is used with clients or prospects it can be confusing or misleading. 

Don’t let your advisor pepper a conversation with jargon.  If you do not understand what they are saying, ask them to explain.   They should be willing to spend the time giving thoughtful explanations. Every good advisor will help educate their clients.  That includes explaining terms, ideas, or strategies.  I try to start my first conversation with any investor with the disclaimer they stop me at any point if I use unknown jargon.  An educated investor is the best client in the world.

Some of the jargon used by advisors are simply acronyms.  OER or operating expense ratio is a common one used.  OER measures the amount of assets used to operate a fund.  This reduces the return to the investor. 

Another common acronym is ETF or exchange-traded fund.  ETFs have exploded over the last 25 years or so as investors have recognized the benefits of lower OERs and intra-day trading. The OER on most ETFs are lower than mutual funds.  Check that number out if you are buying ETFs or mutual funds on your own.  Also make sure they are traded free of commission.  Both high OERs and commissions charged is money not in your pocket.

One point of emphasis I would make is that If your advisor is not completely transparent about how they are paid, you should consider another advisor.  If they are not a fee-only Registered Investment Advisor, there may be multiples ways they are being paid.  These can include commissions, wrap fees, annual fees, account maintenance fees, products sales, upfront sales charge and trailing sales charge. 

If you would like to explore some investment terms including arcane jargon, try NASDAQ’S (another acronym, it stood for National Association of Securities Dealers Automated Quotations) site: https://www.nasdaq.com/investing/glossary/

If you know someone in the investment business, I bet they have used the term “DK’d” before. 

If you’d like to discuss some jargon or better yet how I can help you plan for the future, feel free to reach out.

Please share with others and make suggestions for future articles: peter.oneill@fiduciamwealth.com

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