The Investment Association has launched new guidance to help fund managers communicate their strategies and technical terms with consumers.
According to consumer testing carried out in partnership with The Wisdom Council, three quarters of investors struggle with technical terms, while others have difficulty understanding a range of commonly-used terms.
Less than half are able to identify income, return, growth and yield correctly, and savers also showed wide discrepancies between what savers regard as short-, medium- and long-term investment horizons.
The IA has provided a blueprint to make investments more understandable, with a series of recommendations to help fund managers address the issues investors face and provide greater clarity when communicating about their funds.
The trade body’s guidance includes a list of more than 35 frequently-used terms explained in a simpler language. It suggests a number of simple remedies, such as swapping “fixed income” to “bonds” and “equities” to “shares”.
IA chief executive Chris Cummings says: “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.”
The guidance paper also has terms where the IA believes a description might work better than the current term itself. An example is “absolute return”, which the IA says was a “very confusing” term for the research participants, and many felt it was linked to a return an individual receives on their investment in any type of fund, not just absolute return funds specifically.