Technical language, advice understandability, and perceptions of expertise and trustworthiness: the case of the financial planner.

This study examines the relationships among the extent of use of technical language in an advisory context, the understandability of the advice offered, perceptions of the adviser's expertise and trustworthiness, and the subsequent persuasion effects. The responses of 186 participants, randomly assigned to view one of two videotapes (one tape low in the use of technical terms, the other high), were analysed using structural equation modelling. The results indicate that the overuse of technical language in a lay client consultation reduces clients' understanding of the advice offered Lowered advice understandability negatively affects clients' perceptions of the professional adviser's expertise and trustworthiness and, subsequently, client's intention to seek the professional's advice.

Keywords:

EXPERTISE; TRUSTWORTHINESS; TECHNICAL LANGUAGE; PROFESSIONAL ADVISERS; STRUCTURAL EQUATION MODELLING.

1. Introduction

In an increasingly complex world, many people seek professional advice on a variety of specialized issues, for which they do not have the necessary training, experience and expertise. This knowledge gap between the professional adviser and client places the client in a vulnerable, dependent position. Thus, the perceived expertise and trustworthiness of the professional adviser may be critical to ensuring that the client purchases that advice (Mayer, Davis & Schoorman 1995). From a business perspective, professional advisers and professional advice firms need to consider the factors that might influence clients' perceptions of expertise and trustworthiness, which may lead to the client purchasing the professional advice. In this paper we consider the effect of the use of technical terms within a lay client consultation on advice understandability, and the subsequent effect on client perceptions of expertise and trustworthiness.

This paper was motivated, in part, by the fact that very few studies have considered aspects of language complexity and message understandability on perceptions of expertise and/or trustworthiness (Elsbach & Elofsen 2000 is a notable exception), particularly within an advisory context. Indeed, there is a paucity of research examining determinants and consequences of perceived expertise and trustworthiness in a professional advisory context. Certainly professional journals emphasise both these areas: the importance of client perceptions of expertise and trustworthiness, and the importance of presenting professional advice simply and clearly in order that it can be understood by the client (e.g. Aronoff & Ward 1996; Olivo 1998). Such articles, however, are not empirically based. From a practical viewpoint, this paper was motivated by the knowledge that the discipline behind each advisory context (e.g. law, medicine, architecture, financial planning) contains numerous technical words, concepts and theories that a lay client would struggle to comprehend. The challenge for the professional adviser is to provide useful advice without resorting to highly complex language and confusing the client. To the extent that the adviser can successfully accomplish this aim, the lay client is more likely to view the adviser as open, worthy of trust and competent, and thus more likely to engage the adviser's services. For professional advisory firms, the advisers' relationships with clients become a driver of reputation, current and future client engagements, and profit.

This paper therefore addresses an important issue facing those individuals and businesses providing services of an advisory nature, by empirically investigating the associations among the use of technical language, advice understandability, perceptions of adviser expertise and trustworthiness, and the subsequent likelihood that the client will engage the adviser. This paper is organised as follows. We begin by reviewing the literature on expertise-trustworthiness and the role of advice understandability in the general advisory context. In the next two sections we present background information on the research context and outline the proposed hypotheses linking the key variables. We then describe the research methods used to test the hypotheses and conclude with an analysis and discussion of the results.

2. Literature, Context and Hypotheses

2.1 Theoretical Background

Although trust has been conceptualised in many different ways, we adopt Moorman, Zaltman and Deshpande's (1992, p. 82) definition: `Trust is a willingness to rely on an exchange partner in whom one has confidence'. The definition parallels Rotter's (1967, p. 651) seminal conceptualisation that trust is `... a generalized expectancy held by an individual that the word of another...can be relied on'. Moorman's definition was selected because it emphasises the role of confidence in the trust relationship, which we consider is fundamental to the advisory context, as discussed further below. Expertise, on the other hand, can be defined as that group of skills, competencies, and characteristics that enable a party to have influence within some specific domain (Mayer, Davis & Schoorman 1995).

The related concepts of confidence (Mayer, Davis & Schoorman 1995) and vulnerability or risk (Johnson-George & Swap 1982) are particularly important in understanding the expertise-trustworthiness relationship in the professional advisory context. The services marketing literature has long recognised the intangibility of services compared to products, and the concomitant risk perceived by the potential client, particularly first time clients (Lovelock, Patterson & Walker 2001). The risk is derived from the client's uncertainty about expected service performance outcomes and the desirability weights attached to such outcomes (Clow, Tripp & Kenny 1996). Perceived adviser expertise increases the client's confidence that the adviser can be relied upon to provide the agreed service outcomes, thereby reducing perceptions of risk on the part of the client. In other words, perceived expertise can play an important role in the formation of adviser perceived trustworthiness.

Ultimately concepts such as perceived expertise and trustworthiness are important because a potential client who feels confident about the adviser's ability and trustworthiness is more likely to engage the services of that adviser (Murray 1991). Social psychologists also recognise the importance of the expertise/trustworthiness-intention relationship. They argue that the acceptance of a communication is often influenced by the judgements made of a communicator's expertise and trustworthiness (Hovland, Janis & Kelly 1953). Subsequent researchers have generally confirmed the finding that a source who is perceived as expert and trustworthy is more likely to be persuasive (Ohanian 1990; Sharma 1990; Mazis & Raymond 1997; De Bell, Montgomery, McCarthy & Lanthier 1998; Jones, Stranaland & Wyatt 1998), and therefore, more likely to affect the purchase intention (Grewal & Gotlieb 1994).

The expertise-trustworthiness relationship, as it relates to the purchase intention, has been explored within the marketing literature, but mainly within the salesperson context (e.g. Crosby, Evans & Cowles 1990; Doney & Cannon 1997; Lui & Leach 2001). Few studies have empirically considered the professional advisory context. Some professional services journals have emphasised the importance of perceived trustworthiness and expertise in building a successful consulting practice (Olivo 1998; Kinder 1997). However, such articles are not empirically based, nor are the assertions developed within a theoretical framework.

Understandability of the advice offered in a client/adviser consultation, and its influence on perceived adviser expertise and trustworthiness, is also considered in this paper. Within the context of offering professional advice, the ability to convey complex information in clear, understandable language is likely to impact favourably on clients' perceptions of an adviser's expertise and trustworthiness. In communications research, studies suggest that the use of sophisticated language in a client-professional exchange may affect both the perceptions of the professional's expertise and trustworthiness, and the acceptance of the professional's message (Elsbach & Elofson 2000; Thompson, Brown & Furgason 1981). This, in turn, is likely to impact on the service purchase intention.

Although communications theory emphasises the importance of effective communication, very few studies have empirically considered the influence of effective communication on perceptions of expertise and trustworthiness, particularly in the professional advising context. Given the scant empirical research on the role of advice understandability and client perceptions in the professional advisory context, this study examines the case of the financial planner. This will be described in the next section.

2.2 The Case of the Financial Planner

While there are numerous examples of professional advisory situations, including doctors, lawyers, accountants, stockbrokers and information technology specialists, this study examines the case of the financial planner. The study outcomes, however, are likely to be applicable to the broader advisory context. The choice of the financial planner advisory context was motivated by their increasingly important role in society. One reason for their changed status is the Australian government's long term commitment to reducing reliance on government age pensions in favour of individuals taking responsibility for their own retirement (Price 1999). Additionally, dramatic improvements in life expectancies means that people enjoy a longer retirement period. The need for a viable financial plan in preparation for retirement has prompted many people to seek the advice of a financial planner, often quite early in their working life. Indeed, one in three Australians have already sought the advice of a financial planner and more will follow (Matterson 2000). Very little research, however, has been undertaken on this body of professionals.

A financial planner may be an accountant, banker, stockbroker, insurance broker--the list of those willing to sell financial advice is continually expanding (Matterson 2000). Whether accountant or stockbroker, in Australia all financial planners must hold a licence with the regulator of the industry, the Australian Securities and Investment Commission (ASIC). The industry's professional body is the Financial Planning Association (FPA). The highest level of professional endorsement offered by the FPA is the CFP (Certified Financial Planner) status, which is internationally recognized. Not all licensed financial planners have the CFP qualification, as is the case for some accountants and insurance brokers, who have their own practitioner designations.

The goal of the financial planning process is to `... assess a client's needs, and through a detailed understanding of the investment environment, prepare a wealth creation strategy appropriate to the client' (Price 1999). The assessment of needs in the first instance necessarily requires the client to divulge sensitive financial and personal information, such as personal wealth, lifetime goals and family situation. Further, the success of the financial plan could profoundly affect the client's future lifestyle. This exposes the client to a level of perceived risk because of the importance of what is at stake and the perceived likelihood that the consequences may be (un)favourable (Cox 1967; Clow, Tripp & Kenny 1996). The perceived expertise and trustworthiness of a financial planner may be very important in reducing perceived risk (Murray 1991) and increasing the client's confidence that the planner has the ability and intention to produce a viable financial plan (Mayer, Davis & Schoorman 1995). In the following sections, we develop seven hypotheses which address the relationships between the use of technical language in the provision of financial planning advice, the understandability of the advice, and perceptions of expertise and trustworthiness and the subsequent persuasion effects.

2.3 Technical Language and Advice Understandability

Advice understandability is defined as the ease with which a financial planner's explanations and recommendations are clear and comprehensible. The advice provided by a financial planner may or may not be understandable for a number of reasons. These include rapid speech, strong accent, and inappropriate structuring of advice. This study, however, focuses on the extent of use of technical language and its influence on advice understandability. Technical language refers to the technical financial terms derived from finance, economics, taxation and accounting that may be used during a client/financial planner consultation. The advice offered by financial planners is often complex and generally involves many technical financial terms and concepts which may be unfamiliar to clients. High usage of technical terms in a consultation may impact on the level of understanding of the advice and the explanations offered by a financial planner. Brown, Braskamp and Newman (1978) found this to be the case in a study into the effects of jargon and technical language in professional educator's reports, where a direct link was found between the amount of jargon employed and lay audience ratings of the technicality and difficulty of understanding of the reports.

Communication theory suggests that the use of technical language or professional jargon in an explanation or report can enhance understanding, particularly if the audience is informed (Dwyer 1999) or if technical terms are supplemented with relevant data (Thompson, Brown & Furgason 1981). Communication theory also suggests that the use of jargon or technical language may reduce the clarity of a message (Dwyer 1999). This may be the case if the audience does not possess the same level of technical sophistication as the communication source, or if this source is perceived by the audience as deliberately attempting to create confusion by using technical language (Browning & Folger 1994). Interpretation of the message may be impeded by the receiver's preoccupation with the intentions or the motivations of the source in communicating in this manner (Elsbach & Elofson 2000). It is expected, therefore, that lay clients are less likely to understand a financial planner when technical (financial) language is used during a consultation. This leads to the first hypothesis:

H1: The extent of use of technical language in the provision of financial planning advice is negatively associated with advice understandability.

Figure 1 provides a theoretical model that summarises the hypotheses among the five variables.

[FIGURE 1 OMITTED]

2.4 Advise Understandability and Perceived Expertise

Lay clients, by definition, have limited knowledge of the financial planning function. It is assumed, however, that they are aware of the complexity of the financial planning function. Part of the advisory role involves the ability to take complex knowledge and simplify it to make it understandable to the client (Aronoff & Ward 1996). Therefore, the extent to which a financial planner can present complex financial issues in simple, clear language that is easy for the client to understand, the more likely is the client to perceive the planner as an expert. We can also examine the relationship between understandability and expertise from another perspective. Hovland, Janis and Kelly (1953) defined expertise as the extent to which a communicator is perceived as a source of valid assertions. Advice that is difficult to understand will also be difficult to evaluate in terms of its validity. Indeed, presenting a difficult-to-understand message could signal to the client the camouflaging of incompetence. A positive association is therefore expected between advice understandability and the clients' perceptions of expertise.

H2: Advice understandability is positively associated with clients' perceptions of the financial planner's expertise.

2.5 Advice Understandability and Perceived Trustworthiness

The understandability of a message has been directly linked to perceptions of trustworthiness of a communication source. In an experimental study on the use of easy-to-understand compared to hard-to-understand language in procedural justice research, graduate students found that the use of the former in written explanations of decisions enhances perceptions of the `adequacy' of such decisions and, consequently, perceptions of the overall trustworthiness of the communicator (Elsbach & Elofson 2000). The authors suggest that this connection rests on the symbolic meaning that understandable decision explanations hold for the study participants. The understandability of such explanations appears to signal communicator openness and empathy, which in turn, has been linked to perceptions of trustworthiness of the communicator (Peters, Covello & McCallum 1997). Moreover, the ease with which a particular message is understood is significant because it is an initial and important criterion employed by a receiver early in an exchange in order to evaluate the trustworthiness of the speaker (Elsbach & Elofson 2000). An important implication of these studies is that in professions where trustworthiness is important (such as financial planning), advice understandability is likely to be significant in the formation of clients' perceptions of trustworthiness.

H3: Advice understandability is positively associated with clients' perceptions of the financial planner's trustworthiness.

2.6 Perceptions of Expertise and Trustworthiness

The trust literature proposes that perceptions of trustworthiness are dependent on a number of factors of which expertise (or competence) is very important (Lewis & Weigert 1985; Mayer, Davis & Schoorman 1995; Zand 1997; Whitener, Brodt, Korsgaard & Werner 1998). An individual who appears knowledgeable, skilled and experienced (i.e. having expertise) in a particular field is more likely to be entrusted with completion of a task in that field. Lowered perceptions of an individual's expertise increases the other party's vulnerability to a negative contingency, and therefore, that individual may not be entrusted with the task. Within a personal selling context, prior research provides evidence that customers' perceptions of a salesperson's expertise is a significant predictor of perceived trustworthiness (Crosby, Evans & Cowles 1990; Doney & Cannon 1997; Liu & Leach 2001). They argue that perceived salesperson expertise affects perceived trustworthiness, by increasing the buyer's confidence that the salesperson can provide viable and valuable solutions and deliver on promises. We expect this finding will also apply to the financial advisory context.

It should be noted that trustworthiness is task-specific (Zand 1997). Client perceptions of a financial planner's trustworthiness may be limited to financial/accounting type issues. Thus, a client who perceives a financial planner to be trustworthy, may not extend that trust to areas outside financial advice.

H4: Clients' perceptions of the financial planner's expertise will be positively associated with perceptions of trustworthiness.

2.7 Perceived Trustworthiness and Intention to Seek the Financial Planner's Advice

The source credibility literature is useful here to develop the association between trustworthiness and intention. An important component of credibility is the degree to which a communication source is viewed as trustworthy (Hovland, Janis & Kelly 1953; Rogers & Shoemaker 1971). Within this literature, cognitive response theory (Greenwald 1968) has been used extensively to explain the effect of source credibility on persuasion (Sharma 1990). In a personal selling context, the theory suggests that to the extent a consumer perceives the salesperson as credible (i.e. trustworthy), the consumer will be more receptive to the salesperson's message (Sharma 1990) and is more likely to be persuaded by the salesperson (Ohanian 1990). This increases the probability of intent to purchase (Grewal & Gotlieb 1994). Thus, it could be expected that where a client perceives a financial planner to be trustworthy, there is an increased likelihood that the client will be persuaded to engage the planner.

H5: Clients' perceptions of the financial planner's trustworthiness are positively associated with clients' intention to seek the financial planner's advice.

2.8 Perceived Expertise and Intention to Seek the Financial Planner's Advice

Cognitive response theory, discussed in the previous section, is also relevant to the expertise/intention relationship. A client who perceives an adviser to have expertise is more likely to deeply process the advice offered and thus be persuaded to seek further consultations (Woodside & Davenport 1974). From another perspective, the services marketing literature suggests that higher levels of perceived expertise should reduce the clients' perceived risk in engaging a service provider (Burton 1990; Murray 1991; Lovelock, Patterson & Walker 2001). Purchase intentions are likely to increase because the potential client is more confident that the professional service provider is sufficiently skilled to perform the service (Clow, Tripp & Kenny 1996).

H6: Clients' perceptions of the financial planner's expertise are positively associated with clients' intention to seek the financial planner's advice.

2.9 Advice Understandability and Intention to Seek the Financial Planner's Advice

Notwithstanding the hypothesised link between advice understandability and expertise (H2) and trustworthiness (H3), and subsequently, intention to seek advice (H5 and H6), a direct link between advice understandability and intention to seek advice is also hypothesised. Communication theory recognizes the need for professionals to communicate with clarity and comprehensibility in their dealing with clients (Windshuttle & Elliot 1999; De Vito 1995). Advice that is not well understood creates confusion and uncertainty in the mind of the client, and the quality of the advice becomes difficult to evaluate. Although there is not strong empirical support, we suggest that an easy-to-understand message is more easily processed and thus more likely to influence or persuade.

H7: Advice understandability is positively associated with clients' intention to seek the financial planner's advice.

3. Research Design

3.1 Procedure

This research was performed in two stages. The primary purpose of stage one was to write two financial planning advice scripts that were virtually identical, apart from the extent to which technical financial language was used. Two videotapes were produced using two scripts. Stage two entailed participants viewing one of two videotapes and completing a questionnaire, to provide data to investigate the relationships among the variables.

3.2 Stage One

3.2.1 Financial Advice Scripts A professional financial analyst was employed to write two scripts that were essentially the same, but for the variation in the use of technical financial terms (low versus high). The scripts represented advice to be delivered by a financial planner-actor to a fictitious married couple in their thirties, who ran their own information technology company. The specific topic covered in the script was advice on the options for the investment of savings and an inheritance. These options included superannuation, property and shares.

Five independent financial analysts and three academics with a communications background edited the two scripts. Numerous meetings were held with the researchers to consider these edits and other suggestions before a final version was produced. Below is an excerpt from the two scripts that outlines the overall financial strategy suggested to the couple. The bolded words in the technical language excerpt indicate the technical financial terms.

Excerpt of financial planning advice couched in technical language:

   `Firstly, I think the focus of your financial plan should remain with
   super. Secondly, you should also consider a diversified share portfolio
   that would offer capital growth as well as a small dividend income--this
   will also give the benefits of imputation credits on the dividends. Of
   course, some or all of the shares could be sold to satisfy your liquidity
   needs. Lastly, Mark and Helen, to round off this strategy, I'd suggest that
   you buy an investment property to take advantage of the tax benefits of
   negative gearing.'

Excerpt of financial planning advice couched in non-technical language:

   `Firstly, I think the focus of your financial plan should remain with
   super. Secondly, I suggest that you buy shares which will grow in value,
   give you a small dividend and can be sold any time that you need the cash.
   Lastly, Mark and Helen, to round off your strategy, I suggest that you
   invest in a property which we can organize so as to give you some tax
   benefits.'

The two written scripts were piloted with five administrative and two academic staff in a major university, none of whom had finance/accounting qualifications. The average knowledge of financial matters of individuals in this group was `low' (2.1) as measured on a five-point scale: very low (1); low; moderate; high; and very high (5). The average frequency of reading of the financial press or watching financial affairs programs was 1.8 and 2.5 respectively. This was measured on a scale that measured the frequency of participation in these activities: never (1); rarely; sometimes; frequently; and always (5). Only one of the participants had any working experience in the finance industry. Thus, these staff were considered to be a reasonable representation of the lay public who might seek the services of an expert financial planner. The aim of the pilot study was to verify that the two scripts were perceived differently with respect to the use of technical language and understandability. All subjects detected the differences between the two scripts in terms of the use of technical language: script 1 was ranked on average 1.7, and script 2 was 6.1, on a seven-point scale. The difficulty in understanding either script was also measured on a seven-point scale. The non-technical language script was less difficult to understand (average of 1.7), compared to the average understandability of the technical language script (4.4). Thus, the pilot study provided some validation of individuals' perceptions of the level of technical language encompassed in the scripts, among individuals who had low levels of financial background, and limited to moderate interest in financial affairs.

3.2.2 Video Production The two videos were produced by a University Media Department. Actors were selected to play the role of the financial planner and the clients. To reduce the likelihood that the subjects may focus too much on physical appearances, actors who were considered representative of the context were chosen. Mature-age students played the role of the clients, a married couple aged in their thirties. Three actors auditioned for the part of the financial planner, and the actor selected was male, middle-aged, of medium build, slightly greying and dressed in a typical `accountant' style fashion. The set was designed to duplicate one section of a typical financial planner's office. The back wall of the set design was adorned with a framed Certified Financial Planning Certificate along with other relevant certificates to increase the authenticity of the `office'.

3.2.3 Pilot Test At the end of stage one, six academics were presented with a description of the entire procedure for stage two, to identify potential methodological problems. A number of issues were discussed and resolved.

3.3 Stage Two

3.3.1 Participants Participants comprised first and second year undergraduate business students (none of whom were completing accounting or finance majors) from a large Australian university. Business students were selected because, given their course preference, they would more likely be interested in financial planning issues. However they would not have specific expertise in this field. Thus, they were considered a reasonable proxy for the lay public. It was also considered important that participants had no (or very limited) expertise in financial planning to ensure they would base their perceptions of credibility on the delivery of the financial advice, rather than on the content of the advice (Elsbach & Elofson 2000). In other words, participants were not required to evaluate the advice. (1) The assumption of the sample having only limited financial knowledge and financial work experience was verified in manipulation checks which are reported in the section on variable measurement.

After eliminating eight questionnaires due to missing data, 186 cases were retained in the analysis. Fifty-eight percent of the sample were male and 42% were female. Participant's ages ranged from 18 to 45 years with an average age of 20 years. Participants were either first year (57%) or second year business students (43%).

3.3.2 Procedure Participants were randomly assigned to view one of the two videotapes (technical language versus non-technical language). In a printed package, participants were provided with background information on a fictitious married couple's current financial position and the nature of the advice they wanted from the financial planner, questionnaire instructions, and a four-page questionnaire. They were told that the researchers were interested in their evaluation of some aspects in the provision of advice by financial planners. Participants were asked to read the married couple's financial background sheet, then after viewing one of the two videotapes, to complete the questionnaire. They were advised that the questionnaire responses were anonymous and that there was no one right answer. At the end of the session participants were given a movie voucher to compensate for their time.

Steps were taken to eliminate potential experimental bias. Verbal instructions and experimenter-participant interaction were minimized, and `when necessary' involved only brief instruction about procedural matters. Further, the same verbal instructions were used for the two groups and the research was carried out in the same setting.

3.3.3 Variable Measurement The variables measured in the study were the extent of use of technical language (Technical), advice understandability (Understandability), the clients perceptions of the advisor's expertise (Expertise) and trustworthiness (Trustworthiness) and intention to seek the financial planner's advice (Intention).

The variable, Technical, was operationalised by varying the extent of use of technical financial terms in the two scripts that formed the basis of the two videos. Following the pilot test of the two scripts we were satisfied that they were sufficiently different in terms of the extent of technical financial language used. Understandability was measured using a five-item instrument developed from the work of Elsbach and Elofson (2000). Participants were asked to consider whether the advice in the financial planner's presentation was clear, easy to follow, well delivered, well organized and easy to understand. Intention was measured by asking a single following question: `I would consider seeking advice from the financial planner shown in the video'. Understandability and Intention were measured on a seven-point likert scale, with anchors `strongly disagree' and `strongly agree'.

Expertise and Trustworthiness were measured using a modified Ohanian (1990) scale. Participants were asked to assess the financial adviser's characteristics with respect to these two variables. Trustworthiness consisted of six descriptors: dependable; honest; credible; reliable; sincere; trustworthy, and their antonyms. Expertise consisted of five items: expert; experienced; knowledgeable; qualified and skilled; and their antonyms. Both of these measures were presented on seven-point semantic differential scales.

A number of control variables were also included in the questionnaire. Four questions were asked to assess participants' prior knowledge and experience of financial issues. Participants were asked how often they read the financial section of a daily newspaper or business magazine, and how often they watched or listened to a financial affairs program on television or radio. A five-point scale, indicating the possible responses of: never (1); rarely; sometimes; frequently; and always (5) was used. The mean response for both questions was 2.5 and 2.6, which was between rarely and sometimes. In addition, participants were asked to rate their overall knowledge of financial issues, on a five-point scale with indicators of very low (1); low; moderate; high; and very high (5). The average was 2.6, which indicated that the average knowledge was between low and moderate. A further question investigating any work-related experience in the finance industry, and found that only 9% of the sample had any experience. These results confirmed evidence that participants had limited financial knowledge. Other control variables included in the questionnaire were the participants' age, gender, and highest level of education attained. No significant differences were found in individuals' responses to the variables surveyed, based on level of financial knowledge or experience, age, or level of education. While gender was found to explain some differences in responses to perceptions of expertise (p = 0.095), this was not considered to impact adversely on the overall results of the study.

4. Analysis and Results

This section outlines the statistical analysis undertaken using structural equation modelling (SEM). SEM was used in this study, instead of correlation or path analysis, as it allows multiple relationships between variables to be considered simultaneously, it provides measures of overall model fit, it reveals the significance of each of the relationships between the variables, and it accounts for the impact of measurement error of the multi-item variables (Kline 1998).

4.1 Structural Equation Modelling

The two-stage process of structural equation modelling was used to analyse the data (Anderson & Gerbing 1988). In the first stage of the structural equation analysis, each latent variable was modelled as a measurement model, and confirmatory factor analysis was performed to confirm that each element was a good predictor of the relevant latent variable. In all cases, all items were found to be strong predictors and were retained in the subsequent analysis. Cronbach's alpha were calculated for each latent variable. As can be seen in table 1, these scores range from 0.84 to 0.91, and are well above the often quoted cut-off score of 0.70 (see Nunnally 1978). These scores indicate that we can be confident that the items in each latent variable are measuring a single construct.

In the second stage of the structural equation analysis, the structural model was formulated by specifying the theoretical relationships between the latent variables Understandability, Expertise, Trustworthiness and Intention, and the observed variable Technical. The theoretical model is provided in figure 1. Each of the latent variable scores were calculated as a summated score of the individual items. Table 1 lists the descriptive statistics for each variable. Table 2 contains a correlation matrix, which indicates that multicollinearity is not a problem. The structural equation model was analysed using AMOS 4 using maximum likelihood estimation. Error variances were input into the error terms for each observed variable, using the following formula (Williams & Hazer 1986): Error variance = (1-[alpha]) x variance.

[FIGURE 1 OMITTED]

A preliminary analysis of the theoretical model resulted in the following fit indices: [chi square] = 3.072, df = 3, p = 0.381; GFI = 0.993; AGFI = 0.967; CFI = 1.000. The chi-square measure is not significant, which indicates good fit. Also, the other measures of fit are above the accepted cut-offs of 0.95. This model is clearly acceptable from a fit perspective. However, an examination of the model parameters revealed that one path was not significant and, thus, should be deleted from the model. This was the path between Expertise and Intention (p = 0.731). The model was re-run and improved fit indices were generated. Again, the chi-square was not significant ([chi square] = 3.19, df = 4, p = 0.527) which indicates good fit. Other fit indices were well above normally acceptable minimum values (Hair, Anderson, Tatham & Black 1998): GFI = 0.993; AGFI = 0.975; CFI = 1.00. The final structural model is presented in figure 2.

[FIGURE 2 OMITTED]

4.2 Results

The fit measures in the final model indicate a good model fit and the significant paths indicate support for most of the hypotheses. All of the hypotheses are supported, except hypothesis 6. Hypothesis 1 states that the use of technical financial language in the provision of financial planning advice is negatively associated with advice understandability, as perceived by the client. This is supported in the model ([beta] = -0.204, p = 0.007). The negative coefficient indicates the inverse relationship between Technical and Understandability. Figure 2 indicates that hypothesis 2 is supported ([beta] = 0.254, p = 0.001). This result supports a positive association between advice understandability and clients' perceptions of the financial planner's expertise.

Hypothesis 3 states that advice understandability is negatively associated with clients' perceptions of the financial planner's trustworthiness. This relationship is significant ([beta] = 0.185, p = 0.008). There is also an indirect relationship between Understandability and Trustworthiness, through Expertise of 0.159 (0.254 x 0.625), which brings the total effect of Understandability on Intention to 0.343.

Hypothesis 4 states that clients' perceptions of the financial planner's expertise will be positively associated with perceptions of trustworthiness. This hypothesis is supported ([beta] = 0.625, p <0.000). Hypothesis 5, clients' perceptions of the financial planner's trustworthiness is positively associated with clients' intentions to seek the financial planner's advice, was also supported ([beta] = 0.513, p <0.000).

Hypothesis 6, which states that clients' perceptions of the financial planner's expertise is positively associated with clients' intention to seek the financial planner's advice, is not supported (p = 0.731). However, there is an indirect relationship between between Expertise and Intention, through Trustworthiness, of 0.32 (0.625 x 0.513).

Finally, hypothesis 7 is supported ([beta] = 0.454, p <0.000). This hypothesis states that advice understandability is positively associated with clients' intention to seek the financial planner's advice. The total effect of Understandability on Intention is 0.630, consisting on the direct effect of 0.454, plus the indirect effect of 0.176 [(0.254 x 0.625 x 0.513) + (0.185 x 0.513)].

5. Discussion

The objective of this research was to examine the relationships among the use of technical language in the provision of financial planning advice, understandability of the advice, perceptions of adviser expertise and trustworthiness, and the subsequent likelihood that the client will engage the adviser. Following structural equation analysis, our data suggest that lay clients, who may lack expertise in the area of financial planning, are more likely to understand the advice being provided if technical terms are not overused. This result is consistent with communication theory, such that the use of technical language (or jargon) may reduce message clarity, particularly where the audience possesses a lower level of knowledge in the subject area (Dwyer 1999).

The results also highlight that the provision of clear, understandable advice in an advisory context, such as financial planning, has an important influence on the client's purchase intention, via both a direct and an indirect path. The direct path in the model indicates that, irrespective of the client's perception of an adviser's expertise or trustworthiness, understandable advice is important in influencing intentions. The indirect path suggests that understandable advice enhances perceptions of the adviser's expertise and, in turn, the adviser's trustworthiness, which ultimately influences a client's intentions. This result is consistent with cognitive response theory (Greenwald 1968) and subsequent empirical research on social influence (e.g. Sharma 1990), which posit that a source who is perceived as expert and trustworthy is likely to be more persuasive. The findings for both the direct and indirect paths, linking understandability and intention, underscores the importance of advice clarity in complex advisory situations, such as the provision of financial advice to clients.

It is also noteworthy that there was no support for client's perceptions of the adviser's expertise directly influencing the purchase intention. Perceptions of expertise, however, are important in the advisory context because they influence perceptions of trustworthiness, which in turn is linked to intention. A direct link between expertise and intention has been found in other empirical studies (e.g Clow, Tripp & Kenny 1996; Burton 1990; Jones, Stranaland & Wyatt 1998). Jones, Stranaland and Wyatt (1998) for instance, found that within a salesperson context, expertise, and not trustworthiness, predicted consumers' purchase intentions. One possible reason for the discrepancy between this study and the empirical studies cited above is that within the financial planning context a client's financial future is potentially at stake (rather than being a simple purchase of a single product or service), and trustworthiness (which is influenced by expertise) is critical to influencing intentions, rather than merely expertise. In addition, the financial and personal information which clients divulge to advisers is likely to be of a more sensitive nature than that exchanged between salesperson and customer. This further supports the importance of the role of perceived trustworthiness in persuading clients to seek a financial planner's advice.

6. Conclusion

Within a financial advisory context, this study highlights that perceptions of trustworthiness play an important role in influencing clients to engage an adviser. In the specific advisory context considered in this study, the financial planner, lay clients are placed in a vulnerable position. They are required to divulge highly sensitive and personal information to a relative stranger and the quality of the advice being sought could potentially affect the client's future lifestyle and happiness. A favourable perception of the planner's trustworthiness reduces the clients' perceived vulnerability, thereby increasing the likelihood of purchasing the service from the financial planner.

This study also highlights that the manner in which advice is communicated plays a role in perceptions of adviser trustworthiness and expertise. Complex financial advice communicated in a jargon free, understandable way possibly signals to the client a degree of openness and empathy with the lay client such that the client forms an impression of trust. Such an adviser is also viewed as competent (or expert) probably because the adviser demonstrates an ability to simplify complex material to the point that it is digestible to the lay clients.

The findings in this study have implications for the management of professional advisory firms. The importance of the advisers' relationships with clients cannot be underestimated. Such relationships influence current and future client engagements, and subsequently whether the business is profitable. The results of this study, therefore, could be used by managers of professional advisory firms to guide the recruitment of appropriate professionals. Clearly financial skills and formal qualifications are important criteria when employing advisory staff. However, advisers must also have sufficient interpersonal skills to communicate effectively complex technical advice to lay clients, and to do this in a way that enhances clients' perceptions of their expertise and trustworthiness. Specialised training programs may need to be designed to enhance the communication skills of professional staff, and to orient staff to understand the importance of the non-technical side of their `selling' activity. While many professional advisers may consider that formal qualifications and up-to-date technical skills will ensure their individual success as an adviser, these advisers are essentially engaged in the marketing of services to clients. The business will not prosper unless the marketing of the services is undertaken effectively.

As with any research, there are limitations that must be considered. Despite attempts at realism, the data were collected in an artificial setting rather than in the field, adding to internal validity, but potentially compromising external validity. Perceptions of expertise and trustworthiness were only examined within the context of financial planning services, specifically investment advice. A male financial planner only, was considered, and it may be that the outcomes cannot be generalised to female financial planners. In addition, the low average age of the participants may have affected the study's results. Such participants may not have been as interested in the financial planner's explanations and recommendations, compared to older participants.

Further research could address some of these limitations. For example, the generalisability of these results to a female financial planner could be explored, particularly giving consideration to the role of homophily in attitude change (Woodside & Davenport 1974; Jones, Stranaland & Wyatt 1998). Specifically, any possible interactions between the gender of the client and the gender of the financial planner that affects perceived expertise and trustworthiness, and thus the purchase intention may be investigated. Similarly, the ethnicity of the financial planner and the role of homophily could be explored. A Chinese client, for example, may (or may not) view a Chinese financial planner as more expert/trustworthy than a non-Chinese planner. The study may benefit from replication using a more mature audience (say, 30 to 40 years of age). Such participants may show a stronger interest and motivation in financial planning, in which case the results of the experiment with respect to the intention to seek advice may be more pronounced. The study could also be extended to examine the effect of the extent and form (written document or verbalized) of the financial planner's disclosure of professional credentials and affiliations on perceptions of expertise and trustworthiness. For example, Hurwitz, Miron and Johnson (1992), found that, in a courtroom context, expert witnesses who highlight their academic credentials and institutional affiliations are viewed as more expert/trustworthy than those who do not. It is not the formal written submission of the expert witnesses' credentials that ultimately persuades a judge or jury, Hurwitz et al. (1992) asserts, it is the oral presentation that includes terms relating to the expert's training, qualifications and affiliations (see also Elsbach & Elofson 2000). Finally, other variables such as physical attractiveness and likeability (see Ohanian 1990), may affect a client's decision to seek the advice of the financial planner, and thus may be worthy of further research. Giving consideration to the usually long-term nature of the client-financial-planner relationship, likeability (and for some, physical attractiveness) may play a role in impacting the purchase intention.

(Date of receipt of final transcript: March, 2002. Accepted by Mark Uncles, Area Editor.)

(1) Wells (1993) has argued that the use of students as subjects in consumer behaviour research may be limiting, if they are not relevant to the problem or not representative of the population. This is particularly the case when students are used as proxies for managers. The use of students is clearly an issue that needs to be considered in interpreting the findings of this study. However, the use of students was not considered a major disadvantage, due to their interest in investments and their only low to moderate level of financial knowledge and experience.

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Therese A Joiner ([dagger]) Lynne Leveson ([dagger]) Kim Langfield-Smith ([section])

([dagger]) Department of Accounting and Management, La Trobe University, VIC, 3086. Email: [e-mail]

([section]) Department of Accounting and Finance, Monash University, Clayton, VIC, 3168.

This research was funded by a grant from the Australian Research Council.