Financial disclosure – being clear, concise and effective

financial disclosureThe law says that financial disclosure documents must be worded and presented in a clear, concise and effective manner. This is a requirement of the Corporations Act 2001:

  • Financial Services Guides – Sect 942A (6a)
  • Product Disclosure Statements – Sect 1013C (3)
  • Statements of Advice – Sect 947C (6)

My observation is that many disclosure documents do not meet the standard of ‘clear, concise and effective’. Writers seem to focus on complying with other aspects of the law – having  the correct content. They assume that being complete and accurate is enough. That’s a very risky position to take, and it may break the law.

These standards of ‘clear, concise and effective’ are tough to meet because they can only be judged with reference to the reader, or user, of the document.

An effective document is one that achieves purpose. The general purpose of disclosure documents, as described in the law, is to help people make a decision about whether to buy financial services or products, or follow advice. To be effective, disclosure documents must work to achieve that purpose. That means you must know something about your readers and their decision making process, and use that knowledge to inform your writing. It may mean including additional content not required by the law, but that is helpful for your readers.

Being concise means not including unnecessary material, not saying the same thing multiple times (removing redundancy) and not using more words than is needed to express an idea. It means you should not blindly use a boiler-plate template that includes material that is irrelevant to some readers.

Being clear is a matter of

  1. organising content in a way that makes sense to your readers
  2. using words, sentence structure and a style that can be understood easily.

In short, all financial disclosure documents must be written using the principles of plain language, with a deliberate focus on the needs of users.