This is one of the more common questions we hear about the amount of prospectuses, annual reports, etc. that our clients receive from their investment companies. Would you believe that this much disclosure could actually be bad for you? Especially when it comes to the financial services industry, more disclosure is a benefit to the client, right?
With all the hub-bub in Washington of who should police the financial planning industry of late, the debate about the effectiveness of disclosure is heating up. At a recent industry meeting last fall, discussions centered around the idea that the more disclosure a company unleashes on the public the more confused they become in case after case. Daylian Cain, assistant professor of organizational behavior at the Yale School of Management, discussed his findings of how heavy disclosure can actually harm an investor. The standard example in these cases being the more pages in a disclosure document the less likely the investor is to read it. Read more about this interesting discussion here.
Last July, the SEC changed financial companies requirements for disclosure so that it will now be in a plain English narrative form with the hopes of making it easier to compare between different companies. Reading the article above describes how several firms will look to drown their clients with pages and pages of disclosure. We’ve been working hard over the last few months to make our disclosure form (Form ADV) to be more concise and meaningful to our business activities. We’ll be sending out new copies of this document in the next few weeks.
Photo Credit: luxomedia