I don’t need to tell you environmental, social and governance (ESG) investing is on the rise. It is great to see a continued improvement in the industry as we move towards net zero.
We know clients and advisers must be able to trust ESG products and it should be expected they contribute to positive environmental or social outcomes.
However, there are growing concerns firms are making exaggerated, misleading or unsubstantiated claims about their products’ sustainability. On investigation, some claims don’t stand up to closer scrutiny and they are, as such, accused of greenwashing.
Product disclosure for ESG funds is therefore extremely important and all information regarding sustainability and performance must be evidenced and shared with clients in understandable ways through key features documents.
He needed 500 sheets of paper to disclose the plethora of information required
However, Financial Conduct Authority research shows 40% of people do not read any key features documents they are provided with for any financial products at all and many can’t even remember if they ever received one.
We know a paper-based approach to documentation means slower and administration-heavy processes, is environmentally damaging and has a higher risk of inefficiency. So I find it really frustrating the amount of paper we need to produce for clients under current rules.
Fellow adviser and ex-vice president of the Chartered Insurance Institute Robert Reid recently said he needed 500 sheets of paper to disclose the plethora of information required from himself, providers, the Financial Services Compensation Scheme, the Financial Ombudsman Service and so on just for one new client.
We can now access our medical records through an app, so surely the industry’s default position should be for our disclosure documents to be accessed online through secure portals too, with options for those still wanting or needing paper.
Paper comprises 20% of all waste in the UK, to which financial services is a huge contributor
We use about 12.5 million tons of paper each year in the UK, the equivalent in tree cover to about 21,000 square kilometres – roughly the size of Wales. Paper comprises 20% of all waste here, to which financial services is a huge contributor.
There are, of course, many companies in the industry offering good online solutions across a wide range of products but not all products are included.
The pensions dashboard was due to be delivered in 2019 (who on earth thought that was possible with the unprecedented data mining it requires from providers?). When it does eventually arrive, it will be a good start to what I believe we should aim for: all financial product valuations and documentation online, not on paper.
40% of people do not read any key features documents they are provided with
This will benefit our planet, the adviser and the client.
People increasingly turn online first to read the news, keep up with friends and family and do their banking. This should be the same for the rest of their financial affairs, especially disclosure documents.
Kim North is managing director at Technology & Technical
The main reason why advisers churn out these mountains of paper is because the FCA decrees they must, apparently on the ridiculously misplaced belief that providing consumers with more information engenders greater engagement. Everybody else knows full well that it doesn’t. In fact, it very probably achieves the very opposite.
The FCA’s own research shows that not only do 40% of clients not read all this guff (I suspect the actual percentage is considerably higher) but that many have no recollection of even having ever received it.
By all means inform clients that this material is available, should they be at all interested in ploughing through it all, but forcing it in them regardless, only for it to be ignored or discarded is terribly, almost criminally wasteful, for which the FCA should be held to account but, as we know, never will be.
Does anybody scroll down and actually read the T&C’s from any online company such as, Microsoft, Zoom, Apple, etc. ?