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Sep 13, 2022, 12:00 ET
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ATLANTA, Sept. 13, 2022 /PRNewswire/ — According to a new year-long study titled, Building Opportunities: The Compelling Language of Real Estate Investment Trusts from Invesco, a leading global investment management firm, and Maslansky + Partners, a research-driven language strategy firm, many commonplace words and phrases used in today’s real estate conversations may fall short when used in discussions with investors. One reason why may be that while most financial professionals understand the importance of including potential benefits in communications with clients, many do not know how to articulate them using words that fully resonate with investors.
“It is important for financial professionals to effectively communicate with their clients the potential benefits of real estate investing so they can understand their investment choices, and the research upheld our longstanding belief that word choice matters when introducing real estate investment trusts (REITs),” said Paul Brunswick, Head of Invesco Global Consulting. “Although most of the investors surveyed had favorable views on real estate investing, their views shifted depending on how certain concepts were presented.”
Phrases to Use When Talking about REITs
Based on the extensive research using instant dial response technology, Invesco Global Consulting found that 60% of investors believe that it is a good time to invest in real estate, but only 46% said they were likely to invest in real estate.1 This gap can be attributed to investors not understanding the role real estate can play within a portfolio. Given this, it is crucial for financial professionals to clearly articulate the potential benefits of REITs to clients.
Invesco Global Consulting researched how to best articulate core benefits of real estate investment trusts in a study with 500 accredited investors. The research proved that word choice can impact the importance of potential benefits to clients. The following list of phrases have been shown to help financial professionals highlight the right potential benefits of REITs when talking to clients:
“Words to Use”
“Words to Lose”
Investors Like Plainspoken Language When Describing Real Estate Potential Benefits
With interest rates rising, financial professionals can explain to clients that REITs are one way to potentially play defense when it comes to inflation. When asked what they would rather add to their portfolio for inflation protection, 24% selected “an inflation hedge,” while 76% liked “a source of income that can rise to stay ahead of inflation.”1 The phrase “hedge” is not a plainspoken potential benefit and often investors think of the term in a negative light.
“We believe it is important for financial professionals to better understand investment communications from the client’s point of view, and with that knowledge, they can better communicate real estate alternative investments to their clients,” said Brunswick.
Portfolio Diversification Misconceptions
Historically, retail investors have only allocated a very small portion of their portfolios to alternatives even though the asset class has potential diversification benefits. When talking about the diversification benefits of REITs, 44% of accredited investors believed “comprehensive” diversification worked best over “true” diversification (29%) and “enhanced” diversification (27%). Of the 500 accredited investors surveyed, only 16% felt that diversification was an investing priority, proving that most felt they already had a well-diversified portfolio.1 Given this, it is important to emphasize that a move into alternatives is about achieving potentially better diversification.
“Helping retail investors understand the potential benefits of REITs is the first step toward bridging the knowledge gap that presently exists and democratizing alternative investments for the masses,” said R. Scott Dennis, Invesco Real Estate CEO. “Through effective communication and education, investors will be informed about how alternatives like real estate can potentially broaden exposure to different asset classes within their portfolios and potentially achieve better risk-adjusted returns.”
Not All Real Estate is Perceived Equally
The study found that not all real estate is perceived equally by investors. The majority of investors felt it was a good time to invest in technology projects, apartments/suburban housing and storage but were less comfortable investing in retail, commercial and office space. In this example, most accredited investors immediately thought of empty office buildings as a risk, not an opportunity.1 Given this, it is important for financial professionals to cite specific opportunities in real estate when articulating the potential benefits of investing in the asset class, such as technology projects, medical offices, and senior housing.
Other key findings from the Building Opportunities study include1:
This initiative is part of Invesco Total CX – the total client experience – an all-in-one platform of tools, coaching and content designed to help financial professionals connect with clients, enhance their business, and optimize portfolios. Building Opportunities: The Compelling Language of Real Estate Investment Trusts is one of several research studies that Invesco Global Consulting has conducted over the last 15 years.
1 Source: Survey by Invesco Global Consulting of 500 accredited investors (75% with > $1mm in investable assets, 47% with > $1.5mm in investable assets, 52% male, 48% female, 75% with real estate investment experience and 100% of whom utilized the services of a financial professional.)
About Invesco Ltd.
Invesco Ltd. (Ticker NYSE: IVZ) is a global independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. Our distinctive investment teams deliver a comprehensive range of active, passive and alternative investment capabilities. With offices in more than 20 countries, Invesco managed US $1.4 trillion in assets on behalf of clients worldwide as of June 30, 2022. For more information, visit www.invesco.com/corporate.
Invesco Distributors, Inc. is the US distributor for Invesco Ltd retail products. It is an indirect, wholly owned subsidiary of Invesco Ltd.
Invesco Global Consulting programs are for illustrative, informational, and educational purposes. We make no guarantee that participation in any programs or utilization of their content will result in increased business for any financial professional.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Alternative products typically hold more non-traditional investments and employ more complex trading strategies, including hedging and leveraging through derivatives, short selling and opportunistic strategies that change with market conditions. Investors considering alternatives should be aware of their unique characteristics and additional risks from the strategies they use. Like all investments, performance will fluctuate. You can lose money.
Investments in real estate related instruments may be affected by economic, legal or environmental factors that affect property values, rents or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small- and mid-cap companies, and their shares may be more volatile and less liquid.
Diversification does not guarantee a profit or eliminate the risk of loss.
Invesco does not provide tax advice. Investors should always consult their own legal or tax professionals for information regarding their individual situations.
The opinions expressed are those of the author and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
All date created and produced by Invesco Global Consulting unless otherwise noted.
Not a Deposit | Not FDIC Insured | Not Guaranteed by the Bank | May Lose Value | Not Insured by any Federal Government Agency
Contact: Jamie Braverman, 212-278-9630
SOURCE Invesco Ltd.
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