The objective of this posting is to generate some discussion on the future direction of platform disclosure. The FSA DP 10/02 and accompanying Good and Poor Practice Report (GAPP report) http://www.fsa.gov.uk/pubs/other/gapp_report.pdf lays out the regulators thinking in how the future of platform and adviser consumer related disclosure should be.
In a recent Tweet (23rd October 2010) I quote Samuel Johnson, “I did not have time to write you a short letter, so I wrote you a long one instead, the new disclosure regime http://tiny.cc/bgogc”. The idea behind the Tweet was to initiate a thought process that redefining disclosure will require a product that delivers clarity and consistency to understand but completeness to ensure inclusiveness.
The report concludes that there was a general lack of customer focus on platform output that effectively did not comply with COB rules and TCF outcome 3 (‘consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale’) The GAPP report outlines good practice and poor practice. I will endeavour to summarise the key points.
1. Ensure adviser related literature is labelled clearly and not intended for consumers.
2. Ensure adviser related literature is sufficient, appropriate and comprehensible.
3. Pay regard to the target market.
4. Provide material in a fair, clear and not misleading manner.
5. To conduct consumer testing to test the suitability of information.
6. To provide consumers information that in the case of a multi fund product solution, is consolidated.
7. To produce a quantity of information that is commensurate to consumer attention and understanding. An example of this would be to ensure that there is only single KFD document to cover product solutions, and to ensure that this is focused and relevant to the respective funds being disclosed.
8. To provide a clear and balanced view of risks and benefits of the product.
9. Layering in the form of providing separate addendums for amended and new information should not be provided.
10. Disclosure must show fundamental information about:
a. what a platform is,
b. how the platform works,
c. types of products/wrapper available.
11. To ensure the quality of the disclosure material matches the quality of the marketing material so that consumers will be inclined to read both.
12. Charges information should not be scattered throughout the disclosure document.
13. Charges information should be contained within an easy to find section.
14. Structure text to include headings and sub headings to make it easy to read.
15. Signposting in documents can be used so long as delivers clarity and relevance.
16. Apply plain language, for instance
a. use the word charge rather than commission,
b. do not use the phrase ‘investment money’
c. do not use the phrase ‘other charges’ or ‘additional charges’, use language that is precise.
d. do use the phrase ‘time to time’ in the context of describing charge frequency.
17. To clearly lay out the parties payment (through the parties of platform and adviser) and provide lines of as well as total cost.
18. Use consistent language to describe an investment manager or fund manager.
19. Provide clarity on whether cash balances held in accounts are party to the respective charges.
20. Make the overall costs of the solution clear using a RIY figure.
21. Separate charge disclosure can be used where the consumer perceives the product solution to be a separate product solution to other products that may be held. For instance a consumer holding a SIPP may require for this to be disclosed separately.
A further quote attributed to Samuel Johnson, “Your manuscript is both good and original. But the part that is good is not original, and the part that is original is not good.” At Dunstan Thomas a principle part of our business is in the design and development of disclosure literature through our Imago Front Office platform. It is vital to our clients and ourselves, that the regulator provides guidelines in that there is no ambiguity, so that clarity, consistency and completeness can be provided to the production of disclosure material.