The future of client communications

Anastasia Petraki

Anastasia Petraki

Head of Policy Research

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Although the debate rages on about some of the details, new regulations mean that there has never been greater transparency on how fund information, such as costs and performance, is communicated to end investors.

However, even if these details can be resolved, a single-minded regulatory focus on the contents of paper-based documents is likely to fail consumers. In today’s increasingly online world, regulation needs to take a more innovative approach to client communication.

Digital delivery that engages consumers, not only at point of sale but throughout the holding period, is the way forward.

The new reality

The discussions the industry, regulators and consumers are having on the content of key information documents for investment products (the “PRIIPs” discussion for those in the know) make for an excellent case study.

They aim to come up with an appropriate estimation methodology for implicit transaction costs to include in the document. However, we are neglecting to consider the fact that, anecdotally, very few investors read the key information document in the first place. If they do, they don’t spend more than a couple of seconds on it.

We are also forgetting that anyone willing enough to attempt to read what is a three-page pdf document on their smartphone are likely to give up quite fast. They are likely to give up once they see how much they have to enlarge the text and scroll in all directions just to read it.

How is this important? It shows that for regulatory documents we are still thinking in terms of paper-based disclosure, which is out of sync with consumers’ increasing use of online interfaces to invest.

The 2017 edition of our Global Investor Study, that surveyed over 22,000 people from 30 countries around the world, found that the majority (about two thirds) of investors use technology for choosing and managing their investments. [1]  

The UK’s Office for National Statistics has shown a similar level of individuals in the UK use online banking on a regular basis (69% in 2018 compared to just 30% in 2007) [2]. Meanwhile, a rapidly increasing number are doing their online banking on their smartphone.[3]

Investor communication as well as investor protection need to adapt to this new reality.

Next steps

The findings of a recent report by the International Organization of Securities Commissions (IOSCO)[4] underlined this. It particularly stressed the need for the design of regulated documents to consider how investment behaviour differs between an online interface and when interacting with a human or print materials.

It also highlighted that all the consumer research that fed into the design of regulated documents, such as the Key Information Document (KID), focussed on a paper-based format. That is now increasingly becoming out of date.

So what next? Looking at the KID, clever use of technology can take investors to the next level, where instead of being confronted with a rigid three-page document, they could use an interface that:

  • Allows personalisation to adjust for each person’s individual preferences for things like length of holding period and initial invested amount
  • Has customisable presentation allowing the choice of how key information is presented, e.g. in charts or tables
  • Presents content in layers so as to not intimidate with large blocks of text

Such functionality invites people to interact with the content that they see, thus increasing the chances that they will understand it and use it. To say nothing about its user-friendliness on different devices such as smartphones and tablets.

But most important of all, an interactive KID would go beyond the standard, one-off disclosure at point of sale to something that stays with clients for them to use as long as they are invested in a product.

Harnessing technology

Schroders has been working towards building a digital solution for our clients and all external stakeholders worldwide. This is being set up as an online library of all funds. Each fund has a unique page showing the main characteristics in a way that is compliant with regulation and can be easily modified to reflect any regulatory changes in the future.

Moreover, the page design is being developed in a way that will allow clients to personalise the information that they see and compare between different funds.

This is not exactly an ‘interactive’ KID but it is not a million miles from it either. Users of online fund platforms will be familiar with this type of functionality.

That is why policymakers need to take notice and make the most of what technology has to offer to ensure that regulated disclosure is communicated effectively instead of being dismissed as the “small print”. 

[1] Schroders, “Global Investor Study 2017 – Investor behaviour: from priorities to expectations”, November 2017

[2] Office for National Statistics (UK), “Online banking penetration in Great Britain from 2007 to 2018”, Statista (last visited July 18, 2019)

[3] Ipsos, “Penetration of online banking in Great Britain from February 2014 to May 2017, by device”, Statista (last visited July 18, 2019)

[4] IOSCO, “The application of behavioural insights to retail investor protection”, FR05/2019, April 2019

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