Transparency versus jargon: why you should demand plain English not plain lies
[Estimated time to read: 6 minutes]
Associate Financial Times editor Lucy Kellaway has just distributed her annual Golden Flannel Awards.
She presents them to those whose jargon stuffed and meaningless communications are no better than lies.
The winning entries are so ugly, they deserve recognition.
Past winners include:
- Speedo: for rechristening the swimming cap a “hair management system”
- Falke: for renaming socks “Life Performance Solutions”
- Infosys: for rebranding redundancy “an orderly ramp-down of about 3,000 persons.”
This year, Ms. Kellaway’s overall winner was eBay: for telling the New York Times:
“We are passionate about harnessing our platform to empower millions of people by levelling the playing field for them.”
“Bingo! In fewer than 20 words it combined five previous years’ winners, only to say nothing at all.”
“I’m not upset that you lied to me, I’m upset that from now on I can’t believe you.” - Nietzsche
Next year, Lucy Kellaway should give an extra award for miscommunication in the financial services industry, where jargon doesn’t just confound, it causes harm.
Some financial salespeople deliberately use technical concepts, complicated terminology, muddy language, and acronyms to create a smokescreen.
Presumably, their thinking is the more they confuse a client, tangling them up in knots of nonsensical communication, the less likely they are to know what they are signing up to.
I share this opinion with Andy Haldane, the Chief Economist at the Bank of England.
In a recent interview he said:
"I consider myself moderately financially literate. Yet I confess to not being able to make the remotest sense of pensions.
"Conversations with countless experts and independent financial advisers have confirmed for me only one thing - that they have no clue either. That is a desperately poor basis for sound financial planning.
"This problem is one which, if anything, is becoming more acute over time. More of the risk associated with financial decisions is these days being shouldered, not by the state or companies, but by individuals.”
“Honesty is a vital part of having a good reputation.” - Jim Rohn
Nowhere is transparency in word and action required more than in international financial services.
Here are a few of the most popular communication blurs within our marketplace:
Exciting but baseless promise
QROPS will save you a huge tax bill!
You may lose any potential savings in hidden commission.
New QROPS rules mean you may face additional tax charges if incorrectly advised.
If your adviser gets it wrong, you could now lose over 55% of your pension.
This regular savings plan is just like a bank account, you can access your money when you want. It’s flexible….
Saying they are like a bank account is just a common line used to reassure people with a familiar financial term.
You can reduce your premiums after 2 years.
You can…but you will be charged as though you’re still paying the higher premium!
This makes what is an already prohibitively expensive policy even more expensive.
You can take all your money out after 18 months.
Yes - although, you won’t have any money to withdraw after 18 months, because this has been paid in initial commission.
Pay me for my help with referrals to all your friends.
He’s been paid bags of hidden commission already, and now needs some new victims.
I have a special way of managing money.
Special ways don’t work. Safe and boring does.
Structured products provide a safety net for your capital
Structured products are expensive, opaque, pay a lot of commission and sometimes don’t work out.
Don’t worry if you can’t keep on paying these high premiums: just make them at the start for a few months to increase your bonus later, and then reduce them.
Lock in your savings capacity as an expat now – you can always reduce your premiums after 18 months…
Higher initial premiums mean higher commissions for the adviser, and higher charges for you – for the duration of your policy!
Those higher charges really do remain in place for the entire duration of your policy, even if you reduce your premiums.
We guarantee you 10% a year…
No one can guarantee any returns, and 10% after the high charges means you need around a 16% annual return – really!
If you pay by credit card you can collect your air miles – and pay later when you can afford to.
Yes – and incur interest on money you’re meant to be earning interest on!!!
A horrible sales technique.
It’s free from UK capital gains tax when you move back to the UK.
Whilst you’re UK resident these products can indeed be free of CGT, but not tax-free - gains are subject to your marginal income tax rate.
You’ll get a free quarterly review.
This is just an opportunity for your adviser to sell you something else!
The meeting is not free – it’s paid for by commission through top-ups, fund switches or referrals.
If these aren’t forthcoming, you won’t see the adviser again for dust.
The irony is, no one’s policy needs a quarterly review, but it’s a reassuring thought isn’t it, that your adviser cares so much he’ll keep such a regular eye on it.
Sorry – but it’s just another sales technique.
Why does this matter?
Because the level of supervision and enforcement by regulators in international markets is simply insufficient to protect expatriates.
As respected financial adviser Tony Noto puts it:
“It is challenging to be 100% transparent while most of the industry still hides its fees. The most dramatic example is when I have someone that was sold an offshore pension tell me that a 1% fee for a comprehensive plan is too expensive. These situations present good learning opportunities about the cost of ‘free’ advice.”
Why does he say this?
Because the client he refers to, who thought paying a 1% transparent fee for a comprehensive financial plan was too high, previously dealt with a plain liar.
The client was tangled up in the jargon spouted by IFAs who market their service as being free!
The cost of this free advice for the client unwilling to pay Tony Noto 1% was between 10% and 15% in up-front fees for their pension, and an ongoing annual fee of up to 6.5%!
And that – in transparent terms – is the financial difference between plain English and plain lies…
It’s why you really need to start demanding transparency.
"People in glass houses shouldn’t throw stones" - Proverb
It’s wrong to criticise others if you have similar weaknesses yourself.
And I know that there will be people out there now trawling this website to find examples where verbiage got in the way of plain English!
I’d like to say thanks to these people and invite others to join in, and contact us using the form below when you come across anything on our website, or in our literature, that isn’t as clear as it can possibly be. We’ll change it!
Because we’re not just on a mission to positively change the international financial services marketplace, much more importantly we’re on a mission to positively change your financial outcomes.
Through education and professional support – through transparency in word and deed.
If, like us, you believe that expatriates deserve a better deal, start demanding plain English not plain lies.