The Financial Conduct Authority (FCA) should be commended for listening to industry concerns about key information documents.
This week FTAdviser revealed the serious concerns of senior industry professionals and trade bodies about the implications for investment trusts and their investors of having to put projections of future performance into the new investor information documents.
Simon Fraser, chairman of the £4bn Foreign and Colonial Investment trust, told FTAdviser the FCA's requirements for Kids risked creating a "future mis-selling scandal".
After FTAdviser flagged these concerns the regulator clarified it was aware of industry fears the performance scenario information required in the Kid may appear too optimistic and so has the potential to mislead consumers.
Where a provider is concerned that performance scenarios in their Kid are too optimistic, such that they may mislead investors, the FCA stated it was now "comfortable with them providing explanatory materials to put the calculation in context and to set out their concerns for investors to consider".
While the regulator should be applauded for addressing this industry concern, it needs to recognise the comments made by advisers in our comments section flagging that these documents are still less than perfect.
The regulator needs to do more to ensure Kid requirements don't result in investment providers misleading or confusing the public about what they are paying for.
As pointed out by one of FTAdviser's readers the regulator appears to draw the "blissfully ignorant conclusion" that throwing more information at people means they are better 'informed'.
While there is a risk that if you don't have enough information then you may not be equipped to make a decision or end up surprised by the bill that eventually lands in your lap, our watchdog needs to understand there is also such a thing as too much information.
Too much information can leave people feeling overwhelmed and confused to the point of being beyond being able to understand anything.
There needs to be greater recognition of how the average man or woman on the street absorbs information.
When you have eaten your dinner in a restaurant and the receipt arrives, you are pleased if it spells out whether the service charge has or has not been added and tallies up what that figure is for you.
I am sure most people are equally relieved it doesn't break down the cost of the raw ingredients, the price for chopping them up, the amount the energy company charged to heat up the food and how much it cost for the chef to pull it all together and serve it to me on the plate.
Because if the receipt did state all of that, rather than assist you with calculating how much more you need to pay to the waiting staff, it would frustrate you by forcing you to pick through several pages of explanation as to why the restaurant owner was buying organic carrots, rather than the cheapest ones from Morrisons, to get to the information you want and need.
The key thing an investor needs to know is when they hand over £1 to an investment provider, how much of that shiny coin is instantly taken away in charges, how much of that coin is actually being invested, and what return - after costs - they are, or are not, getting.
It is vital that a more detailed breakdown is available to those who then want to pick through it, but really a good document needs to remember Kiss - keep it simple stupid.
emma.hughes@ft.com
