A few days after the recent Goldman Sachs story broke, I was asked how Synthetic CDOs worked, and I didn’t really know.

I found a tutorial on line that gave a “simplified” diagram and narrative. It was around 8 minutes long.

As I watched Goldman Sachs’ CEO talk to the senate panel in DC several days ago, I was struck by how complex and confusing his answers sounded when asked about many issues, including the operation of these instruments. Needless to say, it was awfully difficult to explain how buying this exposure is in the best interests of investors when the issuer is on the opposite side of the table. The fact that Goldman was betting against the market was an easy soundbyte. The part about how the investment was supposed to work; not so much.

That's not to say complex products are bad for consumers, however it is an excellent opening for an innovator to capture market opportunity when there is a communication disconnect.

In our research, we are finding that words used everyday in the finance and insurance industry are either not understood at all, or associated with something unrelated, particularly with millenials.

For example, in a recent proprietary qualitative study where respondents were asked to define the word “annuity”, none were able to do so correctly, and only 33% said something even remotely in the ballpark. And when asked to associate the word “premium”, almost 60% associated it with something completely unrelated to insurance, such as sports tickets or a high end car (why is it called a premium, anyway?).

So products, services and ways of doing business can be laden with confusion, and clearing that smoke is an opportunity to gain attention and more business. Granted, changing language isn’t that easy in a highly regulated industry, but if it is for public good, there is never more receptivity than at the present time for financial literacy and a breakthrough in understanding.

What are the best ways to find these disconnects and turn them into opportunities?

1. Lean into the misunderstanding – Look for the places where people go “huh?”. Look also for the emotions that go along with it. Do they feel stupid or ashamed? Do they get angry at the communicator? Are they just truly indifferent? Do they really want to know the answer?
2. Find what IS understood – Research here is important. Find out what they do understand about it, even if it is incorrect. Look for the benefits that they took away, listen to what words they use to describe it. Pay attention to what makes the “lightbulb” go off. A great test is to ask your grandmother, grandfather or a child under 10. (unless you have grandparents in finance)
3. Build a Bridge – This is where you create a new way to communicate the product in a way that people “get it”. Make sure it is a bridge to the purpose for the product and not to something that is just easy to latch onto. For example, if it’s an investment offering, it should be about the philosophy, management and time horizon, not about the past returns. Otherwise, confusion is bound to get even worse when the performance isn’t there.

It's no easy task, but great opportunities are never easy. Having a good process for discovering the insight, developing and testing the ideas and communicating them is key.

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