Using jargon that is hard to understand

Effective communication makes a complex idea understandable. Jargon does the opposite, which is what led George Bernard Shaw to have one of his characters say that ‘Every profession is a conspiracy against the laity.’

The SOA has a very clear purpose: to actually inform the client of the relevant aspects of the advice such that they can make an informed decision as to whether to accept the advice. This means that clients must finish the SOA understanding what it is that is being recommended and why it is being recommended. This can only be done by avoiding unnecessary jargon and speaking directly in a way that a client can understand.

Here is a great example of effective, jargon-lite content in a recent SOA:

The BT Wholesale Monthly Income Plus Fund has been chosen because it pays a regular monthly income which we will use to top up your salary (refer to the Salary Sacrifice recommendation on page 7). It has a defensive asset allocation and competitive fees; BT is a very experienced fund manager with an excellent track record of performance.

Australian Ethical is a fund manager which selects its investments using strict positive and negative screening. It does not invest in harmful things like tobacco, uranium or coal mining, exploitation of people or old growth forest logging; it does invest in building a new low-carbon economy and in funding medical breakthroughs, technology breakthroughs, and efficient transport.

Its methodology makes it management fee high but the fund’s past performance has more than justified this fee. It is expected to pay out some tax-effective income twice a year. This fund is designed to be a long-term investment (10 years plus) and will show some volatility over shorter time frames.

The adviser is recommending a slightly unusual fund (the Australian Ethical fund). This fund has been chosen with a view to the client’s stated preference for ‘ethical’ investments (identified earlier in the SOA). The client is clearly being told the basis on which the ‘positive and negative screening’ is implemented. So, while there could be an argument that the terms ‘positive and negative screening’ constitute jargon, the fact that concrete examples are immediately given will assist the client to understand that jargon and see how it fits with their preferences.

The Dover Group