The importance of plain English

I was half way through a meeting with a prospective client and it seemed to be going well. He had given me some background about what he was looking for, and I was into the part of my pitch where I was outlining the core philosophies that shape our advice and recommendations.

It all seemed to be going well, with affirmative nods and ‘ahas’ coming from the client. For the last 10 minutes or so I had been talking about lifetime cash-flow models, asset allocation, risk profiling, passive investing and index tracking. It was going so well I even drew a couple of Gaussian distribution curves to explain volatility within the portfolio.

I paused for breath and said: “If I’m going too fast for you, please stop me and ask me to explain it again.” So he did. In fact he stopped me dead in my tracks when he asked: “What do you mean when you talk about trackers and index funds?”

The whole basis of what I had been talking about for the past 10 minutes had been undermined, simply because I had not checked whether he understood what trackers and indices were. Thank goodness I had not launched into using terms like alpha and beta.

So I had to retreat. I went back to the beginning of my explanations about investment, asset allocation, volatility and risk. Soon his nods and ‘ahas’ were replaced by questions. He was beginning to engage, and at a level he had not engaged previously despite his nodding and ‘ahas’. I had recovered the situation, and not a moment too soon. But it was a stark reminder that we cannot afford to take anything for granted when it comes to a client’s understanding.

Goodness knows I have preached enough times not to talk gobbledegook when dealing with clients, and here I was falling into the same trap. Not only did I use terminology he did not fully understand, I was guilty of not engaging with him. If I had not checked his understanding, he might well have left the office, wondered what the heck all that was about, and then decided to go somewhere else.

Yet it was not always like this. I remember taking more time to describe our investment philosophy. I used simple building blocks, words and pictures to build up an evolving story. But over time the words became more familiar to me, and things like tracker and index seemed to enter into the everyday lexicon of our language. I thought everyone knew what these words meant, and were happily using them on a day-to-day basis.

This week’s experience has reminded me how easy it is to overestimate another person’s ability to understand what it is we are saying. That being so, we should remember to keep checking their understanding, rather than assuming a nod means yes.

Dennis Hall is managing director of Yellowtail Financial Planning