Invesco report finds that some of the words commonly used by advisors may not resonate with clients
When did you last mention to a client about an ‘inflation hedge’ or refer to an investment as being ‘less volatile than equities?’
These phrases and some other commonly-used investment terminology may not resonate with clients and communication could be improved by making some simple changes.
New research from Canadian asset management firm Invesco and language strategy firm Maslansky + Partners, considered the words used when talking to clients about real estate investment.
It found that, when talking about real estate investment trusts (REITS), investors prefer plain language rather than jargon and that a communication gap may explain a gap between the share of investors who say it is a good time to invest in real estate (60%) and those who said they were likely to invest in real estate (46%).
Using the right words to explain the benefits of real estate investment is key to changing investor perceptions.
For example, asked what they would rather add to their portfolio for inflation protection, 24% of investors chose "an inflation hedge," while 76% liked "a source of income that can rise to stay ahead of inflation."
That’s because the phrase "hedge" is not a plainspoken potential benefit and often investors think of the term in a negative light.
"We believe it is important for financial professionals to better understand investment communications from the client's point of view, and with that knowledge, they can better communicate real estate alternative investments to their clients," said Paul Brunswick, head of Invesco Global Consulting.
What not to say
Other phrases that lose investor interest and their better-received counterparts include:
- "A portfolio invested in different markets" instead of “A portfolio invested in different properties"
- "REITs that are more stable than equities" instead of "REITs that are less volatile than equities"
- "Consistent rental income" instead of "Durable rental income"
"It is important for financial professionals to effectively communicate with their clients the potential benefits of real estate investing so they can understand their investment choices, and the research upheld our longstanding belief that word choice matters when introducing REITs," added Brunswick.
More or less?
More generally, the research shows that investors prefer the language of "more" over the language of "less."
For example, two thirds of respondents preferred the phrase "increasing efficiencies" over "reducing inefficiencies."
