IA helps fund managers speak to savers in their own language

Wednesday 20th February 2019

The Investment Association (IA) has today launched new guidance to help fund managers communicate more clearly with UK savers.

Three-quarters of investors struggle with technical terms, according to consumer testing carried out in partnership with The Wisdom Council, with savers facing the following challenges:

Difficulty understanding a range of commonly-used terms; with less than half of savers able to correctly explain income, return, growth and yield.
Despite half of savers citing risk as the most important factor when selecting a fund, the IA’s research revealed that the link between risk and reward was not well understood, with risk being perceived negatively.

There were also wide discrepancies between what savers typically regarded as short, medium and long-term time horizons for holding a fund.
As part of the IA’s wider agenda to make the investment process more understandable, the trade body has provided a series of recommendations to help fund managers address these issues and provide greater clarity when communicating about their funds.

As well as using plain language, the IA is recommending fund managers to use terms consistently across their communications so that savers are able to compare products more easily.

Chris Cummings, CEO of the IA, said: “With 75% of households saving into a pension or investment fund, we need to find a better way to communicate with our savers. Our industry needs to speak to savers in the language that they understand and the IA is leading a programme of change in this area.

“Savers should be able to understand the objectives of their funds in clear and simple language, so that they can choose the products that best help them achieve their financial goals.

“Our guidance is designed to complement the current work of the FCA, and help fund managers achieve greater clarity in their communications.”

The IA’s guidance includes a list of over 35 frequently-used terms, explained in simple language. It also suggests a number of simple remedies, such as swapping the terms fixed income and equities, to bonds and shares which are better understood by savers.

For more complex concepts, such as risk and time horizons, asset managers should look to provide more detailed explanations. Savers were found to prefer a written explanation of how risk affects their fund rather than simplistic rankings alone. When describing time horizons, rather than using short, medium and long-term, asset managers should provide the number of years.

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Notes to Editors

To view the IA’s Fund Communication Guidance document: click here.

Methodology: The IA’s guidance has been informed by consumer testing, in collaboration with The Wisdom Council, which gives an insight into what customers understand and how they would like things explained to them. The testing explored how consumers interact with the fund industry and aimed to explore how best to engage consumers across fund documentation. In particular, the testing explored clarity of language in objectives, policy and strategy as well as consumer expectations regarding performance reporting, risk and time horizons. The testing was carried out from June to September 2018 and included both qualitative and quantitative phases, including focus group sessions, round table discussions with participants and an online questionnaire completed by 1000 investors.

PS19/4: Asset Management Market Study - feedback to CP18/9 and final rules and guidance: As part of the FCA’s Fund Objectives Working Group working group, it was agreed that the Investment Association (IA) would work with its members and consumer representatives, informed by consumer research, to promote the use of consistent terminology in communications from fund managers about their funds. This Guidance is the output of this work.

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For further information, please contact:

Helen Ayres, Media Relations Manager: [email protected]

T +44 (0)20 7269 4620; M +44 (0)7508 724 06

Notes for Editors

About the Investment Association:

The IA champions UK asset management, supporting British savers, investors and businesses. Our 250 members manage £7.7 trillion of assets and the asset management industry supports 100,000 jobs across the UK.

Our mission is to make investment better. Better for clients, so they achieve their financial goals. Better for companies, so they get the capital they need to grow. And better for the economy, so everyone prospers.

• Our purpose is to ensure investment managers are in the best possible position to:
• Build people’s resilience to financial adversity
• Help people achieve their financial aspirations
• Enable people to maintain a decent standard of living as they grow older
• Contribute to economic growth through the efficient allocation of capital.

The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
The UK is the second largest investment management centre in the world, after the US and manages 35% of all assets managed in Europe.