Most fields have some sort of unique vocabulary that they use internally. When talking to clients or other outsiders, they are careful to avoid their internal vocabulary because outsiders wouldn’t understand it. Well, we in financial services have our own vocabulary that is as complex and esoteric as that of pretty much any other field. However, we love to use it with clients. Why? Because it makes us sound smart and knowledgeable, and most importantly, we don’t really want you to understand. We want you to think this is too complicated for you and to be embarrassed to ask questions like what are 12b-1 fees or loads when we are pitching various mutual funds.
Ask us about a stock, we’ll hit you with terms like EBITDA, free cash flow, and fully diluted. Wanna talk about bonds? Get ready to hear about duration, par value, and call provisions. Now we’ll always be happy to explain what a term means to you, often by using even more confusing terminology.
Sure investors would be well served if they learned financial terminology. We sometimes perfunctorily advise clients to learn more about investing and its terminology. We may even explain some of these esoteric terms on our website. However, we know few retail investors will have the patience to learn how investing works and the terminology behind it. We know that most clients and potential clients can be easily snowed by this terminology, so we use it to our advantage. The more you don’t understand the better for us. Your lack of understanding helps make our profession as lucrative as it is. It enables us to explain away under-performance, sell you profitable (for us) products, and gain control of more of your money from which we cipher off a small piece every year.
Check out some other ways we in financial services con, er help, our clients: