This post was authored by Adem Tumerkan, Dunham's Content Writer. If you have questions concerning today's topic, please call us at (858) 964 - 0500. Hold us to higher standards.

Key Takeaways:

• Clear communication is essential for earning client trust and loyalty.
• Simplifying complex investment topics makes clients more confident and engaged.
• Use plain language, analogies, and visual aids to explain financial strategies.
• Tailor your communication style to each client’s preferences and knowledge level.
• Follow-ups and recaps reinforce understanding and deepen relationships.

Success as a financial advisor hinges on your ability to explain complex investment concepts in simple, relatable terms.

Let’s face it - finance is full of technical jargon. Words like diversification, compound interest, or asset allocation might seem second nature to you, but for many clients, they’re confusing and intimidating.

To build lasting client relationships and foster trust, you must translate financial complexity into language that clients can understand - and feel confident acting on.

Why Simplifying Investing Matters for Client Retention

Client retention – as I’ve written to you about before (read here) - is key to long-term success.

According to YCharts’ 2022 survey, over 88% of clients said that how frequently and clearly their advisor communicates plays a significant role in staying loyal and making referrals. Among clients with over $500K in assets, that number jumps to 92%.

In short: simplifying how you talk about investing isn’t just helpful—it’s vital to earning and keeping trust.

When clients understand what you're doing and why, they stay engaged, less anxious, and more likely to follow your advice.

Speak Their Language: Use Plain, Adaptable Language

You don’t need to dumb things down—you need to translate.

For most clients, plain language works best. Instead of saying, “We’re going to diversify your portfolio,” say, “We don’t want all your eggs in one basket—so we’re spreading your investments around.”

But some clients - think engineers or data-savvy professionals - may want more technical depth. You might explain asset rebalancing as “regularly tuning the engine to optimize performance based on changing conditions.”

The key is tailoring your style to match the client’s personality and level of understanding.

Make It Stick: Use Real-World Analogies

Taking it a step further is even better – such as using analogies to help make these financial concepts stick.

These can help turn an abstract financial concept into something concrete and familiar.

Here are a few examples:

• Alpha-Generating – Imagine you’re hunting for treasures at a flea market. While most see clutter, you’re hoping to find the gem that’s worth more. Well, in investing, we aim to spot these hidden opportunities to bring you extra returns.
  
• Compound interest - Think of it like planting a tree. In the beginning, growth is slow, like a sapling. But over time, the tree grows larger and produces fruit (interest). That fruit falls and plants new trees (interest on interest), and soon you have an entire orchard.
  
• Liquidity - Imagine your investments are like a house. If you need cash quickly, selling your house might take time and effort – hence it’s not very liquid. But having cash is like having water on tap, it’s readily available whenever you need it.
  
• Risk-Adjusted Return - like driving a car, it’s not just about how fast you get to your destination, but how safely you get there. If you drive too fast (seeking high returns), you risk crashing (higher losses). A well-balanced approach is like driving at a speed that gets you to your destination safely and on time.

Analogies connect investing concepts to real-world experiences - making them easier to digest.

Interested in more analogies? I wrote a piece a couple months ago highlighting the top eight analogies financial advisors can use to connect with clients. In case you missed it - read here.

Show, Don’t Just Tell: Use Visual Aids

For clients who learn better through visuals, charts and graphs can be invaluable tools. Use simple bar charts, pie charts, and line graphs to illustrate how different investment strategies work overtime.

• For example, a line graph showing how compound interest can grow an initial investment much faster than simple interest over time can help clients visualize the benefits.

These visuals break up the conversation and offer clients a break from dense discussions, making the information more digestible.

Highlighting this point, our Executive Vice President – Salvatore M. Capizzi, CEPA – wrote an article explaining sequence risk through an easy-to-grasp story. But what really stuck with readers were the visuals he made (look here).

Invite Questions - and Create Comfort

Simplifying financial concepts isn’t just about breaking down terms - it’s about making clients feel comfortable enough to ask questions. Create an atmosphere where clients feel safe asking questions without fear of being judged.

When clients are engaged, they’re more likely to retain the information you provide. It also deepens their trust in you as their advisor - knowing that they’re part of the conversation instead of simply being spoken to.

Reinforce With Recaps and Follow-Ups

After a meeting, send your clients a follow-up email with a written recap or a short video summary of the key points discussed. This allows them to review the information at their own pace and ensures that they retain the most important takeaways.

Written recaps can also reduce misunderstandings and provide clients with a resource to revisit complex topics. Offering educational materials like blog posts or explainer videos gives clients an opportunity to dive deeper into specific subjects on their own time.

Final Thoughts: Simplicity Builds Trust

Simplifying investing concepts does more than clarify strategies—it strengthens your client relationships.

By using plain language, relatable analogies, visual aids, and encouraging active participation, you make clients feel more engaged and confident in their financial journey.

However, it's important to tailor your approach. While many clients benefit from a simplified explanation, those with analytical or detail-oriented backgrounds might appreciate a deeper dive into more complex concepts.

Adjusting your communication style can help clients feel more understood, thus strengthening your role as a trusted advisor.

Sources:

1. Two New Studies Show Impact of Better Client Communication on Financial Advisor Growth | Nasdaq

Disclosures:

This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance. All examples are hypothetical and are for illustrative purposes only.

Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for information purposes only and should not be considered as investment advice.

Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.