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Can’t see the wood for the key facts

Looking through the lat- est FSA consultation papers, my eyebrows raised at a line in CP05/12 which stated: “It has long been recognised that many consumers do not read the information (specifically the key features) that firms give them at the point of sale.”

Any of us who have advised on the purchase of regulated financial products know what happens within the enclave of a client meeting. Clients want the assurance that the provider is reputable and the product will do what it promises but they look for few other assurances from the literature.

Thousands of pounds have been spent on qualitative research, where members of the public sit in viewing rooms with key features in their hands, having been fed bottles of wine and paid a few quid to discuss what they like and dislike. If my nan was locked in a room for 90 minutes and got a bit tipsy before being interviewed by a nice researcher, I know she would come out with lots of: “Very nice, dear.”

With the advent of mortgage regulation, we saw key facts come of age and grow to colossal length. Now we have proposals for a two-page Quick Guide to set out the most imp- ortant factors for consumers buying regulated products. Consumer research has led the FSA to state that the document needs “to stand out from other marketing material”. It should enable firms to clearly set out the key benefits and risks of each type of investment in an easy-to-read format. Quick Guides will follow a tabular format, containing numbered questions with bulleted answers.

In order for Quick Guides to raise themselves above the mountain of marketing material, they need to be designed well. Consumers also want a key facts document that does not look like something received from the Inland Revenue. This is where the advertising industry comes into play, for creative types should lead the design issues, not civil servants.

The intention is to announce the implementation timetable for the new package next March, with further changes to charge disclosure and projections. The provisional plan is to bring the disclosure package into effect in 2007, to coincide with the planned implementation of the markets in financial instruments directive and simplification of the conduct of business sourcebook.

I hope consumer testing of the complete disclosure package, to be undertaken later this year, includes the whole of the literature journey. Looking at the disclosure information in isolation does not paint the whole picture:

  • Key facts about our services.
  • Menu.
  • Business card.
  • Terms of business and/or customer agreement.
  • Marketing material from the advisory firm.
  • Copy of the fact-find.
  • Quick Guide.
  • Simplified fund prospectus.
  • Illustration for any products recommended.
  • A suitability letter.
  • Corporate information on any recommended provider.

As any compliance person knows, you have got to be aware of other well-intended initiatives that affect compliant sales. The ABI recently issued a consultative pack for insurers to help ensure the marketing of pensions and life products is clear. A final paper is due in the autumn.

Plus, we have the FSA’s simplified prospectus requirements for funds to put us on an even playing field on fund disclosure with Europe by the end of September.

But back to my nan, who thinks Liverpool Victoria is the best financial services company in the world. She hasn’t a clue about what her product is or what it invests in. It is all about trust.

Kim North is the founder of Technology & Technical


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