closeup portrait, dumbfounded, flabbergasted man reading tablet

Too much information can be confusing and unhelpful in helping clients understand their account statements, the products you offer and their own financial plans, but regulators and investor advocates seem to believe the opposite.

Don’t get me wrong, I am a strong believer in transparency with clients. The more they understand, the less surprised they are and the less likely they will sue their advisor or agent. However, when you inundate clients with information, you risk that they will get lost in the details, thereby becoming overwhelmed and disengaged.

There’s no doubt that this will lead clients to have less understanding of even the basics. I’m not just referring to completely unsophisticated investors or uneducated people; I’m referring to the masses of clients — from the less affluent to the high net-worth (HNW) — who invest in securities and purchase insurance products.

There are two key examples, among many, of the impact that too much information can have on clients: account statements and financial plans.

In the case of client account statements, they contain a substantial amount of information such as holdings, values, fees and other details relating to each account. Even I have been left confused by some of the information contained in my account statements because of the changes that dealers have been required to make to comply with their regulatory requirements.

On each occasion that my statements underwent substantial changes, I needed a tutorial from my advisor. This does not dissuade me from reviewing my statements, but I bet others feel discouraged and toss these into the recycling bin, unopened, along with other mail received from the dealer. This cannot possibly lead to more investor protection.

The second example relates to financial plans. Certain very HNW clients who need tax planning — and have accountants and lawyers on speed dial — likely need and want a full financial plan with pie charts in every colour and bound in a booklet type format. I don’t have anything against the odd pie chart, but the software packages may be overly complicated for many clients who have a relatively straightforward base of assets and liabilities and have some basic questions they want answered.

When a complicated document is delivered that sets out the financial plan, but doesn’t set it out in a digestible manner, this can cause confusion among clients. Clients need to understand their role and what is needed for them to fulfil their financial goals. Plain language documents with a clear set of directions for clients is crucial. Otherwise, the financial plan causes confusion, rather than direction.

These basic concerns apply to most issues in which there’s a push for more information to be delivered to investors. Do you think clients read the prospectus delivered to them? Do you think clients have a better understanding of fees since CRM2? The message to investor advocates and regulators is that sometimes, less is better than more.