As firms prepare for the consumer duty, making tweaks to how numbers are presented in communications can improve client understanding, a numeracy focused social enterprise has said.
Plain Numbers works with companies and organisations to help them improve their communications to make them more easily accessible for consumers.
According to research, almost half of adults in the UK only have a primary school level understanding of numbers.
Plain Numbers co-founder, Mike Ellicock said this means that financial service providers and advisers are greatly overestimating the ability of consumers when it comes to understanding the numbers presented to them in relation to their mortgages, investments and pensions.
Speaking to FTAdviser, Ellicock said when it comes to the consumer duty, “no one has really thought about the numbers side and it is so obvious”.
Ellicock highlighted Steven Pinker’s concept of the curse of knowledge and the idea that it is very difficult for an individual to remember what it is like to not know something that they now know.
“That’s one of the things we find everywhere in the firm’s we are working with, because they’re so familiar with their materials.
"It’s not really a criticism, we all fall into it. So a big part of what we are doing with firms is not only looking at the way they present numbers, but taking a step back and realising that a lot of adults will be anxious about the decision making around financial services,” Ellicock said.
Back in 2015, the Financial Conduct Authority recognised poor numeracy as the number one consumer vulnerability, but Plain Numbers said firms have been slow to act on this and change how they communicate numbers and data to consumers.
As part of the consumer understanding outcome of the consumer duty, which comes into force in July this year, firms are expected to reduce poor outcomes by improving the information individuals are given about a product or service.
The implementation of this will be done in a number of ways, depending on the firm, product and service.
Recently, the FCA outlined that this might mean rethinking how some existing mandatory client communications are presented to make them more efficient.
This may mean providing greater signposting and providing simple, plain English explanations of any technical information.
Ellicock stresses that simplifying the numbers can play a significant role too.
Take mortgages for example. Ellicock noted that when it comes to communicating the impact of interest rate changes, lenders typically do not do the maths for the customer.
But doing so would allow customers to quickly and easily understand the impact of a rate change and make an informed choice about what to do next, irrespective of their personal level of numeracy.
Likewise with pensions, Plain Numbers have shown that a lot of savers struggle to understand charging structures. However by communicating charges in pounds and pence rather than percentages, client understanding can be greatly improved.
Ellicock explained that some communications are harder to strip back than others, but said: “What we've shown is that there are rather straightforward things you can do that are going to lead to double the number of people understanding.”
The organisation currently works with a number of organisations across a variety of sectors. In the financial services sector its partners include the Financial Service Compensation Scheme, the Bank of England, and the Building Societies Association.
jane.matthews@ft.com
