In a conversation with a friend of mine, he recalled how he only recently learned what a bond was and how it could act as an investment. He's a 30-year-old American male with a master's degree in Marine biology, and he didn't really understand what a bond was or how it worked.  I don't think this is unusual, and it serves as a great reminder that we need to watch our language.

So many of the terms we use are incomprehensible to the average, intelligent, hard-working adult. In addition to being to complex, often they don't even mean what we're trying to say. (Does anyone really think that standard deviation is a good measurement of risk?) There seems to be a growing hunger in society for simplicity. Real people just want to know what something means instead of trying to figure out what language we're speaking.

(Language and simplicity is a problem in other industries too--just think of the design differences between Microsoft and Apple, and the challenges of the soap industry.)

I think that once you've spent a couple of years in this industry, it's easy to use these terms as if everyone understands them. But 83.7% of the population doesn't understand (and doesn't really want to, either) what standard deviation, normal distribution, or fat tail really mean--much less the term of choice for the recent crash, the black swan. And I bet that most of us don't really understand these terms either.

If part of our job as financial advisors is to clarify and simplify, a good place to start might be with our own language.