The Investment Association has launched guidance to help fund managers communicate more clearly with investors.
Consumer testing carried out by the trade body in partnership with The Wisdom Council had found three quarters of investors struggled to understand technical terms.
Fewer than half of savers were able to correctly explain the terms income, return, growth and yield, the research showed, while the link between risk and reward was also not well understood.
The IA is recommending that fund managers use terms consistently across their communications to make product comparisons easier, as well as using plain English to describe products.
The guidance, published today (February 20), includes a list of more than 35 frequently used terms and suggests a number of remedies such as changing the terms fixed income and equities to bonds and shares.
In addition, asset managers are being asked to provide more detailed explanations of time horizons and risk, with savers preferring worded explanations rather than simple rankings.
Chris Cummings, CEO of the IA, said: "With 75 per cent of households saving into a pension or investment fund, we need to find a better way to communicate with our savers. Our industry needs to speak to savers in the language that they understand and the IA is leading a programme of change in this area.
"Savers should be able to understand the objectives of their funds in clear and simple language, so that they can choose the products that best help them achieve their financial goals."
Adrian Lowcock, head of personal investing at Willis Owen, said the initiative was a good idea.
He said: "The gap between industry speak and what investors are familiar with has only been growing. Part of the problem is the increase in regulation over the past 10 years has made it harder for companies to feel confident producing documents that a typical investor would first understand and secondly actually find interesting.
"The challenge is much greater than most in the industry realise; for example we mix up simple terms, referring to investors as both savers and investors which itself can confuse people.
"There is a massive gap when you first start investing between an investor's knowledge and what is required to be a successful investor. Basic principles of investing such as diversification, risk and portfolio construction are too often assumed to be known, or just never explained."
Darius McDermott, managing director at Chelsea Financial Services, agreed: "We think this is a very good idea. As a business that deals directly with the consumer we are very aware of difficulty the industry has with language and jargon.
"Some commonality across the industry would be a very good move."
