Today (13 May 2014) The FCA published the outcome of a thematic review into how fund charges are presented to customers. I encourage you to read it here. It’s only 13 pages long, including the covers and all that, and is clearly and concisely written. They had to, really!
In common with the issue of complex terms and conditions documents highlighted in the FCA’s annual Risk Outlook earlier this year (excellent summary infographic here) this thematic review reinforces yet again one of the most entrenched and difficult challenges faced by our industry. How to communicate key technical information simply and effectively to our customers.
It includes quite a few examples of customer-centric good practice, which is encouraging. But there are also depressing examples of basic requirements for good communication not being met:
- inconsistent use of headline charge figures (Annual Management Charge (AMC) vs Ongoing Charge Figure (OCF)) making comparisons difficult
- failure to explain some charges clearly or at all (administration and performance fees are singled out for mention in the review document)
- failure to convert legal and technical language into something a customer can engage with
Getting these kinds of things right is important for all sorts of commercial and regulatory reasons, but very difficult to do. Often, in our experience anyway – because of what are perceived from inside a business to be exactly the same reasons.
I’m not a betting woman, but if I was I’d give short odds on a Google search finding thousands of pages of regulatory output and academic study on the impact of – information asymmetry – in financial markets. It doesn’t help that so many in our industry have either traded on building in complexity or on their ability to unravel it. An ugly sort of co-dependency for our customers.
Various well intentioned regulatory attempts to break the cycle have met with limited success. Key Features documents are a case in point. These were originally market tested by the Securities and Investments Board back in the early 1990s as short, sharp, to the point documents with the primary aim of helping customers compare products more easily. Fast forward 20 years and multi-page monsters have become the norm, chucking in everything but the kitchen sink, just to make sure all bases are covered. Intentions are good. End results, not so much.
Anyone in financial services marketing will tell you how hard it is to battle the powers of legal, actuarial and compliance darkness to produce something a customer might actually understand. And that’s just when it comes to top line marketing items. The thought of tackling hard core technical documents like key features, terms and conditions, prospectuses and charges guides, well here’s a little skit I wrote a while back as part of a client project. Let me know if you recognise the scene.
Ambitious Marketing person: That’s a great idea, let’s get the agency on to that right away. I’m thinking a really visual customer brochure, a couple of sales aids to pick out those fantastic new features and a campaign to drive take up. What’s the budget? [Insert significant amount]? That sounds good. I’ll take responsibility for this work stream.
Unimpressed risk and compliance person: The key features and terms and conditions will need updating too. Who’s taking that on?
*collective looking down of marketing people, shuffling of papers, shifting of seats, an awkward silence*
Senior Marketing Manager:Â [slightly too keen new graduate and/or long serving techno-bore] will take that on.Â *looks in general direction of relevant individual(s) to make it clear, your company expects!
New graduate/techno-bore (timidly): Is there any budget for copywriting or external support?
Senior Marketing Manager (without hesitation):Â No. Just speak to compliance and the lawyers and add a couple of paragraphs to what’s already there. It shouldn’t be too hard. No-one reads that stuff anyway.
If you’re a fan of 24 you’ll know that super-agent Jack Bauer is back after years in hiding, and he’s in London. Once he’s done saving the world as we know it, perhaps we could ask him to have a word with legal, actuarial and compliance. New graduate/techno-bore (and probably also the FCA) need some heavy weight back up to break the cycle of disclosure despair. And fast.
PS: We’re up for it at the lang cat too, if you need a hand.