Clarity in communication

'It is important to present clear, accurate, complete and timely communications that use plain language and presented in a format that conveys the information effectively'.

Stakeholders report that the investment profession’s communications are flawed in a number of ways:

  • Focusing on individual manager performance and rarely making the broader case for the value of investing;
  • Emphasising returns that are inherently uncertain, rather than processes and costs that can be communicated with greater certainty;
  • Tending to set expectations at too high a level, and;
  • Lacking clarity.

In short, those we spoke to for this report believe that investment managers spend too much time talking about how they perform relative to one and other and too little time helping clients to understand what they do, how they do it and how that creates value. This observation should not be too surprising. Investment management is a competitive activity that can generate attractive profits.

Investment management firms will – and should – compete aggressively for assets. This can lead them to emphasise their own product in order to differentiate it from other products in the market, but there is also a need to remind consumers and other stakeholders about the broader value of investment management. It is important to remind people that investment managers act as agents and not as principals. They work on clients’ behalf, not on their own account, and owe them a fiduciary-like duty. It would be helpful to explain what that means in practice, how it differentiates investment from other parts of financial services and what that means for clients.

Stakeholders observe it is not just important for investment firms to increase their share of the pie, but to grow the size of the pie. They also comment that the profession has found it hard to unite around a common message about the importance and value of investing because of competition between different parts of the profession (active and passive; hedge funds and long-only) and their representation across different trade bodies.

Given the growing need for individuals to safeguard their own financial futures, it is important that the profession does a better job of making its case. It is also important that our clients understand what they can expect of us. These expectations are set out in CFA Institute’s Statement of Investor Rights.

CFA Institute’s Statement of Investor Rights

Our clients have the right to:

  • Honest, competent, and ethical conduct that complies with applicable law;
  • Independent and objective advice and assistance based on informed
  • analysis, prudent judgment, and diligent effort;
  • My financial interests taking precedence over those of the professional and
  • the organisation;
  • Fair treatment with respect to other clients;
  • Disclosure of any existing or potential conflicts of interest in providing products or services to me;
  • Understanding of my circumstances, so that any advice provided is suitable and based on my financial objectives and constraints;
  • Clear, accurate, complete and timely communications that use plain language and are presented in a format that conveys the information effectively;
  • An explanation of all fees and costs charged to me, and information showing these expenses to be fair and reasonable;
  • Confidentiality of my information;
  • Appropriate and complete records to support the work done on my behalf.

Read more in our report.