We have reviewed current pre-sale investment documents issued by firms to consumers to see if they communicate effectively before new rules come into force in 2027.
Current pre-sale investment disclosure documents are too difficult to read and understand for most consumers.
Why we did a review
We carried out this review to understand how well current pre-sale investment disclosure documents work for consumers before the regime comes into force.
What we looked at
We have reviewed how easy it is to read and to understand current pre-sale investment disclosure documents to support firms with making improvements when the Consumer Composite Investments (CCI) regime comes into force on 8 June 2027.
This will give consumers clearer information to help them choose investment products.
Firms will have considerable freedom to present the disclosures in a way that promotes consumer understanding, with standardised requirements limited to costs, risk and return and past performance information.
We expect readability and intelligibility to improve under the new regime.
Existing PRIIPs and UCITS documents are highly templated and prescriptive and written in jargon or legal language that many consumers struggle to understand.
Readability
We reviewed 132 pre-sale investment disclosure documents from manufacturer firms to see how easy they were to read.
We assessed readability using the Flesch-Kincaid method, a widely recognised tool that shows how easy text is to read. Of the 132 pre-sale disclosure documents, we found that only 6% were written in plain English, with the rest scored difficult to read (31%) or fairly difficult to read (63%).
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Data table
Intelligibility
We also looked at the same documents and a further 40 pre-sale investment disclosure documents, from firms that both manufacture and distribute products, to see how easy they were to understand.
The total 172 pre-sale investment disclosure documents covered a range of products that will be covered by the new rules.
Amplifi Intelligibility Risk Platform was used to assess intelligibility. This goes beyond readability and assesses whether the reader is likely to understand the meaning of the information. Amplifi set a benchmark score of 70, which is a GCSE level of understanding. All 172 pre-sale investment disclosure documents tested fell below this benchmark.
The data revealed that word complexity was the main driver for the reduced intelligibility – likely due to:
- Industry jargon
- Technical phrases
- Drafting choices
In addition, a high number of complicated and challenging words affected intelligibility scoring across all documents assessed. This negatively impacted the score for all investment disclosures, particularly relating to complex products.
Why this matters
Research cited by Plain Numbers[1] indicates that 1 in 5 adults in the UK feels anxious about numbers and avoid situations involving numeracy, and 49% of the UK population at working age have the numeracy skills equivalent to primary school level.
We expect firms to explain product disclosure information in plain English to help consumers understand and feel confident investing.
Firms design their own documents so should ask themselves whether consumers will be able to understand them and make informed decisions about their options.
We will use these findings to help firms transition to new, clearer investment disclosure documents.
Next Steps
We will repeat the review of pre-sale investment disclosure documents exercise next year to track progress.