Targeted Musings on Financial Marketing

Don’t Take Financial Jargon for Granted (You just might lose prospective investors)

04 Nov 2019

It’s a recurring theme in the conversations we have with potential and current marketing clients: the low-hanging fruit in the ETF universe has already been plucked, so to speak. The simplest, most easy-to-understand funds offering passive, broad exposure to the overall market have already been launched, and the competitors in that space are currently locked in a “race-to-the-bottom” fee war. As issuers turn to increasingly niche ETFs offering exposure to more complex investment themes, investor education becomes more important than ever.

Unfortunately, because so many ETF issuers and creators are too close to their products, they can often end up leaning a bit too heavily on financial jargon, expecting the reader or viewer to immediately be able to make sense of it. If your target audience consists entirely of sophisticated financial advisors and institutional investors, this may not necessarily be a problem, but if you’re hoping to reach the wider public and educate them about your ETFs, this can be a major issue.

Here’s our related guide on How to Tailor Your ETF Message According to the Audience


Don’t take anything for granted

Terms that are tossed around frequently and casually in the financial world, such as “factor,” “weighting,” “multifactor,” “beta,” “alpha,” and “benchmark,” may seem fundamental to asset managers, but are often beyond the grasp of typical investors, even some with ample amounts of investing experience. To get your fund’s main value propositions across effectively, it’s often necessary to assemble a firm foundation by slowly stacking simpler concepts atop one another, building to more complex terms. For example, a would-be investor is unlikely to understand the benefits of a multifactor strategy if they don’t know what a factor is at all. Similarly, the term “smart beta” is likely to evoke blank stares, even from some sophisticated investors, if they don’t have a sufficient grasp of the difference between alpha, beta, and smart beta.


Investor education is an opportunity, not a barrier

The fact that investors may not at first properly grasp all of the nuances of a fund may appear on the surface to be a major setback, however this could not be further from the truth. High quality investor education—whether in the form of investment cases, animated videos, infographics, or whitepapers—can serve as incredibly valuable sales tools. Each piece of content has its own role to play in the sales journey of prospective investors. An animated video might introduce just the top-line value propositions and terminology to give a website visitor the key bits of knowledge they need to move onto more advanced, in-depth investor education, such as whitepapers. Keep in mind, an investor is unlikely to make an allocation to a fund without understanding how it works. Bit-by-bit, you’ll be able to introduce more complex, nuanced bits of financial jargon as well, so long as you take the time to define your terms and build from simple to complex.


The bottom line

Financial jargon is the “inside baseball” of the financial services industry, and it can be so engrained in our ways of thinking that we rarely stop to ask ourselves whether our target audience will even be able to understand some of the terminology we routinely throw around. By taking an educational approach and building from simple terms to more complex ones, ETF issuers will be well-positioned to reach prospective investors that may otherwise disengage as soon as they encounter jargon they don’t understand.