Mandated disclosures are tricky to get right; if written in a way consumers can easily understand, there is a good chance they aren't disclosing enough. Too much detail and legal jargon, and consumers' eyes pass right over them.
Yet mandated disclosures over potential conflicts and consumer consent are what many in the financial services industry see as an appropriate way forward for advisors and clients in any regulatory mandate.
So at least two heads of national brokerages, speaking at the Financial Industry Regulatory Association's annual meeting in Washington D.C., are promising to do a better job at making them work.
Mary Mack, head Wells Fargo Advisors, says crafting clear, understandable disclosures has been a focus at her firm.
“A plain English disclosure, so you can understand it,” is what's needed when advisors are putting clients into any financial product, Mack says. “If I can’t understand what you just told me, then I probably shouldn’t be in that product anyway.”
She said Wells Fargo is currently reviewing the documents produced in all five of its business channels. “Now we’re looking for ways to streamline,” Mack says, “How do we think about that with a lens toward meeting our regulatory requirements—because we’re going to have to, and some language won’t be negotiable—and ensure that clients understand what they need to understand. It’s a massive task.”
Mack says the firm needs to think about these issues from the clients' perspective when crafting disclosure language. "Does it give the client greater understanding?"
Morgan Stanley similarly is reviewing its disclosure language, to ensure the right facts are being communicated in the most readable format possible. “Clients are often overwhelmed by the amount of disclosure, the technical language in the disclosure,” says Greg Fleming, president of Morgan Stanley Wealth Management.
“What is the actual impact on the client, away from the labels, the various standards and the bills? It’s very important not to lose sight of that,” Fleming said.
