There’s a definite trend in the financial services industry towards shorter customer communications.
One-page summaries are now the preferred approach in many areas – pension transfers, for instance, where the regulator is working to make communications shorter and clearer. But is this succinct approach always the right one?
Long, wordy messages can certainly be off-putting. The crisis in pensions; the growth in personal debt – both are often attributed to unwieldy communications that consumers don’t read.
Customers’ lack of willingness to take on board Ts & Cs has led to work to improve small print, while the Financial Conduct Authority (FCA) has specific requirements for the firms it regulates on disclaimers, disclosures and the prominence of risk warnings.
But, in our desire to simplify complex, lengthy documents – are we in danger of going too far the other way? A recent article in Money Marketing thinks so, asking whether the ‘insistence on a single page is going from one extreme to the other’.
Why the trend towards shorter communications?
There’s long been an issue with wordy, jargon-heavy financial services communications. Common sense and research dictate that consumers are more likely to engage with shorter, snappier messages than a 50-page report full of dry terminology.
For regulated businesses, the FCA is heading the move to shorter communications. The regulator’s pension transfer consultation paper CP19/25, published in July this year, proposed that firms should issue a one-page summary of their suitability report (often a lengthy document). This would set out the relative value of the transaction and level of risk involved.
Pension transfer advice is a particularly complex area to communicate. We published a blog in December exploring how firms that manage pension transfers can ensure their advice is up to scratch.
And this isn’t the first attempt by the FCA to encourage clearer communications across financial services. We looked in March at moves to make pension communications simpler, while last August, new rules came into force governing the information current account providers need to publish.
Are shorter communications always a good thing?
The move to more concise messaging sounds overwhelmingly positive. But are there potential downsides? The Money Marketing article thinks there are issues to be considered:
- Will too much information be lost? In the case of pensions transfers, if the information in the suitability report is necessary, it will need to be provided one way or another. This may just see a lengthy report chopped up into smaller pieces, and as the article points out, ‘Fifty pages of reading is 50 pages, however it is divided’.
- If providers publish a separate summary alongside the main report, will consumers read only the summary and not the longer report? If so, will they miss vital information?
- In the case of pension transfer advice, many clients have more than one plan – which would make a single one-page summary unfeasible, without tiny fonts, which would work against the FCA’s aims around suitability. Sending communications in miniscule fonts is not the most appropriate approach for an audience that is often approaching retirement age!
Finding the right balance in customer communications
As with many things, the answer here might lie in moderation. Producing communications that are succinct and favour plain English over technical or very formal language. Steps firms could take to improve their customer communications include:
- Ensuring your communications are clear, fair and not misleading, in line with the FCA’s requirements
- Making sure information on pricing is transparent
- Looking at FCA rules around communications; the regulator flagged issues with insurer renewal communications as long ago as 2016. Its observations can help to identify areas for improvement in other sectors too
- Identifying any ways that small print could be improved in line with best practice guidelines, in particular ensuring that any disclosures and disclaimers are correct and displayed with suitable prominence
- Ensuring that your team reviews and approves everything your business publishes; robust Compliance team reviews is something the FCA has been particularly focused on recently
- Identifying whether introducing an element of automation your Marketing and Compliance processes could help to make them more ingrained and watertight. Automating the review and approvals process can mandate Compliance sign off, ensuring no non-compliant materials slip through the net
Make regulatory compliance non-negotiable in your communications
Shorter communications may be the way forward – but compliance with the FCA’s requirements remains paramount.
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