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The Language of Financial Advice

The financial industry has a language all its own. It’s a language not all of us, as investors or prospective investors, fully understand or are comfortable using.

Beyond Basic Financial Terminology

Most of us know a few basic finance terms. However, when the discussion turns to the difference between a charitable lead trust and a charitable remainder trust or between a municipal bond and a municipal bond fund, many of us feel we’re listening to a foreign language.

That’s not a comfortable feeling, particularly when you’re trying to plot a course for your financial future. It can be even more frustrating if you work with a financial advisor who uses a lot of industry jargon. In advisors’ defense, it’s often difficult to avoid the industry-specific terms because they are necessary in developing the strategies to help you pursue your goals.

Advisor Communication

Ideally, your advisor should explain things to you in easy-to-understand terms — even if it entails using examples or illustrations to help you understand the concepts behind the terms or how they apply to you.

The good advisors do that, because they know both your comfort and confidence levels are essential in helping you make educated, objective decisions about your finances. If your advisor is using terms that don’t resonate with you or you don’t fully understand something, it’s important for you to speak up. Good communication goes both ways in a client-advisor relationship.

Financial Terminology Resources

Nonetheless, there may be financial terms that you hear or read about outside your interactions with your advisor that are unfamiliar or confusing. Take the time to look them up and learn what they mean.

There’s no underestimating the value of increasing your financial literacy, including building your knowledge of common financial terminology. Doing so will help you understand your financial statements, as well as the strategies your advisor suggests. You’ll be able to ask more specific questions and have a better understanding of your options. Importantly, you’ll feel more in charge of your financial future.

Another excellent resource is the BrokerCheck glossary on the Financial Industry Regulatory Authority (FINRA) website: It contains terms related specifically to the advisor search and evaluation process, which will be helpful if you’re not yet working with an advisor but would like to do so. And, if you’re ready to search for an advisor or are thinking about advisors, use LPL Financial’s Find an Advisor tool.