Faster horses and prettier factsheets

Majid Shabir, Founder and CEO at Instinct Studios

Last year, Instinct Studios asked retail investors and financial advisers to assess their perceptions of fund information, to find out how the communication of investment information could be improved.

We surveyed 100 financial advisers (79 independent and 21 restricted) and 500 retail investors.

Although we surveyed a highly knowledgeable and qualified set of advisers, their opinion of fund information was a bit worrying, although not necessarily surprising. A fifth described current fund information as complex and 14 percent said it was confusing.

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These might seem like small percentages, however if this is representative of the adviser community and we assume there are some 20,000 advisers in the UK, this means 4,200 feel that fund information is complex and 2,800 are confused by it. If so many professionals are struggling with it, how must their customers be feeling about it?

The answer to this, unsurprisingly, is that they’re even more confused and frustrated. Three quarters of the retail investors we surveyed do not fully understand the fund information they receive today. Almost a third of retail investors believe fund information is usually impenetrable for anyone but an expert investor and a similar proportion think the fund sector is in the dark ages when it comes to communication.

One of the objectives of our research was to determine what the investment industry’s smarter consumer communication priorities are. Among retail investors, the highest ranked communication method was ‘interactive fund information’, followed by ‘downloadable fund factsheet’. Interestingly, when financial advisers were asked to rate different communication methods, 77 per cent rated the downloadable fund factsheet as most important. Only 13 per cent of advisers described interactive fund information as the most important method of communicating fund information.

So advisers are confused by fund information, but their preferred communication method is still the downloadable fund factsheet, which has remained largely unchanged for the past 20 years. It’s worth reminding ourselves of a comment made by automobile pioneer Henry Ford, who said: “If I had asked people what they wanted, they would have said faster horses”.

What I like about the FCA’s recent Smarter Consumer Communication initiative is that it’s encouraging innovative thinking. If the investment industry had been invented today, would we really say the best way to explain a fund to a client would be to cram static and out-of-date information onto two sides of A4 and make this available to download? I don’t think we would, but I suspect if we asked financial advisers what they want from investment communications, they would still say ‘prettier factsheets’.

There are business benefits to reinventing the delivery of fund information. Some 48 per cent of investors said if information was easier to understand it would encourage them to invest and 56 per cent said they would be more likely to invest with a company that provided interactive fund information.