Most factsheets and Key Information Documents fail to hit the mark.
That’s the conclusion of a recent Money Marketing article looking at fund manager documents – Key Information Documents (KIDs) and fund factsheets.
As part of their research into due diligence, the magazine asked advisers ‘what they look for in fund factsheets, how useful KIDs are to them in their research, and what information they often struggle to get hold of’.
The findings will be useful for fund manager marketing teams – or anyone else involved in producing factsheets or KIDs.
The advisers interviewed identified a number of problems with fund factsheets and KIDs. We summarise them here and look at ways you can tackle them.
1. Incomplete information
Factsheets from fund management firms are designed to contain brief information on fund performance; charges; assets and investment objectives.
But in many cases, the documents do not contain sufficiently detailed information to be useful to advisers.
In some cases, this leads to advisers not using the sheets at all – a pretty galling revelation for asset and fund management marketers who spend time producing them.
One of the advisers says that the information they want, for example for a fixed interest fund, would include ‘credit rating breakdown, yield to maturity of the underlying bonds, duration’ – which many sheets do not include.
These sorts of specifics – along with bespoke content, which other advisers cite as something they’d like – clearly take time to produce.
Often, a lack of approved data can be the stumbling block.
Marketing teams can struggle to find accurate statistics to include, meaning that the time it takes to find (and then get Compliance approval for) this level of detail can be a challenge.
Having an easily-accessible library of pre-approved content can be a huge help here.
If you regularly use the same form of words – for example, about AUM, performance or fund characteristics – having a library of pre-Compliance-approved wording can save you time.
A searchable library of presentations, slides, videos and images can make finding and sharing approved content easy. Some slide library tools are clever enough to know that when data in one slide is changed, all presentations containing that slide need to be automatically updated.
This can dramatically cut down the time you take to get sign off from your Compliance team.
If new or edited slides can be given a ‘not approved’ watermark, Compliance’s job is made even simpler, as it’s easy to identify slides needing sign-off.
2. Hard to compare different fund managers
Another complaint is that it can be difficult to compare one fund manager’s offerings with another’s.
As the article says, advisers find ‘each provider’s information varies wildly’.
Property funds come in for particular criticism here.
The upcoming PRIIPs regulations introduce more prescriptive disclosure rules for certain products, so may help with inconsistency.
The regulations include set questions that KIDs for these products must include. You can read more about PRIIPs and its requirements here.
KIDs for products that fall under PRIIPs must answer the following questions:
1. What is this product?
2. What are the risks and what could I get in return?
3. What happens if [the PRIIP manufacturer] is unable to pay out?
4. What are the costs?
5. How long should I hold it and can I take my money out early?
6. How can I complain?
7. Other relevant information
For fund managers, providing this information in a standard format should make the production of KIDS simpler.
Many of the answers to the above questions will not change. Create Compliance-approved responses, and you can produce KIDs quickly and easily.
Fund factsheets follow less prescriptive rules than KIDs. This makes comparison harder, as managers have more leeway to decide how they present their information.
However, if you think about the data that would be useful for advisers and investors, and present it in a way that’s fair, clear and not misleading, as the FCA demands, you will be on the right lines.
3. Transparency is difficult to achieve
Transparency is a bit of a buzz word in investment at the moment.
It’s essential that your fund is clear about returns, risks and charges.
The article lists some of the things that would make fund factsheets more transparent.
The author believes the key things are ‘clear objectives followed by the strategy for achieving those objectives, then setting targets, and showing the measures and timeframes.
‘This is necessary information so that people know whether to be pleased or disappointed and when to judge that.’
Disclosure on charges is another key element.
Fund factsheets have to provide clear cost disclosure of all costs. These include estimated dealing costs and the amount of research paid for within the total commission.
Make sure your documents make charges clear and unambiguous. Ensuring you follow FCA rules on prominence will help here.
Meeting the regulator’s requirements on disclosure is also essential. This is an area where lots of firms fell short in the Authority’s recent review into suitability and disclosure. You can read more about how to meet the FCA’s disclosure requirements in this blog).
Creating user-friendly documents
Making your fund factsheets and KIDs user-friendly is vital.
It means you are communicating with advisers and investors in the way they find most useful. Listening to your audience and understanding their needs is key to achieving this.
The FCA’s rules on communications, as well as wider regulations like the EU’s PRIIPs requirements, can provide helpful guidelines that – if you follow them – will set you on the right track.
To find out more about the FCA’s Treating Customers Fairly rules, which will help you to produce information in a way that is usable, helpful and valuable, you can download our TCF FAQs.
The FAQs include questions covering:
Expectations of firms
Evidencing TCF (Management information)
Rules on providers and distributors
You can get a free copy here.