If investment-industry websites were books, the reviews would be brutal.
“The problem with the copy that we’re reading and analyzing is that it is turgid, dense and complex,” said Fergal McGovern, chief executive of VisibleThread, a company that offers tools to analyse how well corporate websites communicate.
VisibleThread scanned the websites of 69 global money managers, including Canada’s RBC Global Asset Management, BMO Global Asset Management and the Caisse de dépot et placement du Québec. The average overall readability score, on an index where 60 or higher is ideal, was 36.2. “We broadly got poor readability and poor accessibility – a jargon-laden result,” Mr. McGovern said.
Introducing the missing link in financial literacy – the financial-services industry’s inability to communicate in plain language. Arguably, it’s as big a problem as the decision-making on an individual level that has so dramatically emphasized spending and debt over saving and investing.
VisibleThread’s clarity index for asset managers was based on readability, use of overly long sentences, use of the passive voice (harder to read than the active voice, and more weasely) and the use of hard-to-understand jargon. A sample VisibleThread finding: Long sentences made up 25 per cent of the written material that was examined, compared with a target level of 5 per cent of clearly written content.
Mr. McGovern explained the low readability score as being the result of the money-management industry’s desire to impress clients with a lofty tone. “People are worried that if they use a different tone or a different way of communicating, it would somehow lower the integrity of the product.”
There’s also a power dynamic at work here – staying incomprehensible helps the investment industry perpetuate the idea that it, and it alone, can manage your money. The weakness in this attitude is apparent in declining levels of trust in the financial industry globally.
The 2018 Edelman Trust Barometer, quoted by VisibleThread, found that trust in the financial industry has fallen significantly in 13 of 28 countries. Trust levels in Canada fell 3 per cent from the previous year, while in the United States, they fell 20 per cent. Fifty-six per cent of people surveyed in Canada trusted the industry, compared with 58 per cent of Americans.
VisibleThread argues that the financial industry could improve trust by communicating more clearly, which makes sense. We are starting to outgrow the feeling that it’s our own fault when we can’t understand what the financial industry and its people are talking about. That’s the story of declining trust – it reflects the perception that unclear communication means you’re hiding something, not that you’re smart and play in a higher league.
Firms that communicate more clearly would benefit from stronger customer loyalty and less of a cost burden for staff to answer client questions, VisibleThread argues. It also says clearer communications would improve customer response to corporate marketing.
The best performer in the clarity index was a U.S. mutual fund company called Putnam Investments. Putnam has a Canadian connection – it’s owned by Winnipeg-based Great-West Lifeco. The Caisse, which manages money for the Quebec Pension Plan and other pension funds, nailed seventh place in ranking. RBC came in 15th, while BMO was in 20th after placing near the bottom in a 2016 version of the same ranking.
You can help yourself be more financially literate at the same time as you help the financial industry become better communicators. Every time you read or hear something you don’t understand from the industry, say so.
We hate to appear ignorant about money when dealing with the financial industry, so we too often submit to its jargon and self-important blather. Instead, demand clarity. Own your ignorance about a particular point of finance and insist on getting information you can understand from your investment adviser, financial planner, banker, mortgage broker or accountant. To paraphrase a comment reportedly made by Albert Einstein, mastery of a subject means you can explain it simply.
FinLit on Campus
Globe and Mail personal finance editor Roma Luciw and I will be conducting financial literacy sessions on university and college campuses this fall. Let us know if you’re interested in us coming to your school. It’s an opportunity for students to hear about debt, budgeting, investing and more from unbiased experts who don’t sell financial products for a living. We don’t charge anything for these sessions. You just have to cover our travel costs. Contact us at firstname.lastname@example.org or email@example.com.