Americans Befuddled by Financial Jargon Make Investing Mistakes

May 5, 2008

This article is included in these additional categories:

Financial Services | Regulatory

Most Americans find the language of Wall Street technical and confusing and may be making investing mistakes and missing opportunities as a result, according to a nationwide survey by AARP Financial Inc.

More than half (52%) of 1,203 adults surveyed said they’ve made an investment that had an unfavorable outcome – such as unexpected taxes or early-withdrawal penalty – because they were “confused” by or “didn’t understand” the investment.

Confusion Rules

  • More than half of those surveyed (54%) said they do not read financial literature because “it’s too hard to understand.” When asked to compare various communications, 82% said their car insurance policy is easier to understand than a mutual fund prospectus, and 79% find prescription drug inserts easier to understand.


  • Less than one-third of those surveyed said they understood the terms “basis point,” “expense ratio,” or “index fund” well enough to explain them to a friend or co-worker.
  • Half of those surveyed described themselves as “not so” or “not at all” knowledgeable about investing, and more Americans feel confident in their ability to select the right surgeon for a major surgery than feel confident about choosing the right investments.

Jargon Costly

  • Over half (52%) of those surveyed said they’ve made an investment mistake because they were confused by or didn’t understand an investment.
  • Specific mistakes cited by respondents include failing to or waiting too long to invest because of confusing information (cited by 30%) and making an investment they regretted because they didn’t understand it (28%).
  • One out of six Americans have failed to sign up for a retirement plan at their job because they didn’t understand how it worked, and more than four in ten (44%) said they don’t understand how an IRA account works.
  • Less than one in five (19%) survey respondents said they are very confident they will have enough money to live comfortably in retirement, due in part to this confusion.

Not Making the Grade

  • Asked to grade the financial services industry on how well it explains saving and investing to consumers, two-thirds of survey respondents gave the financial services industry a “C,” “D” or “F.”
  • Four in 10 (41%) said information from financial services companies is “not so” or “not at all” helpful.
  • Almost three-quarters of those surveyed (73%) said financial professionals use more jargon than their car mechanic and more than half (52%) said financial professionals use more jargon than doctors.
  • Troublingly, many Americans said poor communication is intentional (agreed or somewhat agreed with statement):


“These findings are a call to action for the financial services industry,” said Richard “Mac” Hisey, chief investment officer at AARP Financial, a taxable subsidiary of AARP. “Ultimately, no one is well-served by this confusion – not the industry, not consumers and certainly not our relationship with the investing public. We talk a lot about transparency in this industry but not enough about simplification and understanding. What value does disclosure bring if the average investor can’t comprehend it?”

About the study: The survey of 1,203 adults age 18 or older was conducted by telephone from January 23 to February 10, 2008 by GfK Roper Public Affairs & Media, a division of GfK Custom Research North America.

Explore More Articles.

Marketing Charts Logo

Stay on the cutting edge of marketing.

Sign up for our free newsletter.

You have Successfully Subscribed!

Pin It on Pinterest

Share This