The product disclosure rules mean firms need to rethink their language from the ground up.
New CCI rules on product disclosure…what’s changing, and why?
From 8 June 2027, a new product summary document is mandatory for open-ended funds (OEICs, unit trusts, UCITS, retail AIFs), closed-ended funds including investment trusts, overseas funds marketed under the Overseas Funds Regime, structured products, insurance-based investments and CFDs.
The new product summary will replace both existing Key Investor Information Documents (KIIDs) used by UCITS funds and the Key Information Documents (KIDs) used for other investment products. As part of continued plans to set higher standards of consumer protection across retail financial services, the Financial Conduct Authority (FCA) is “reforming retail investment product information by moving to a more flexible and proportionate approach, that will let firms innovate and produce more engaging, consumer-centric communications”.
The intention is for these documents to help investors make better informed decisions.
What will new product summary documents look like?
That’s the tricky part. The FCA is not asking firms to follow a particular template, but has said before a sale, distributors must highlight at a minimum to consumers the following information:
A brief explanation of the product
The ongoing costs figure of the product, and other costs relevant to the product (for example, one-off costs)
The risk and return score of the product and a brief explanation of the product’s risk and return profile, including any required warnings for the product
That sounds like a lot of explaining…
It does, doesn’t it? And that’s where things might get difficult. Back in July, the FCA published startling findings that just 6% of 132 existing KIIDs and KIDs it examined met its plain English criteria (I wrote about this during the heatwave back in August). The FCA plans to repeat the exercise next year, when the first published product summary documents will be hoping to pass muster.
Giving firms a blank page and asking them to “innovate” is likely to feel like a burden for many, especially as the demand from the FCA is for firms to think much more deeply and holistically about the way they communicate.
The FCA and the Investment Association are encouraging firms to move away from formulaic statements towards more contextual language that readers will actually understand.
Here’s a snippet citing poor practice from the IA’s risk warning guidance published earlier this year.
The common phrase “The value of investments can fall as well as rise” meets the rule’s literal wording but does little to aid understanding of how often each of these scenarios is likely to occur. It may also not be clear to all consumers how ‘the value of investments’ relates to their money. Instead, firms are encouraged to use contextual explanations that help consumers grasp what “risk” means in practice.
You might be surprised to see the phrase you’ve come across in virtually every piece of investment content is now used as an example of poor practice. But it shows that the way firms think about language is due for an overhaul. That’s the problem when language becomes so overused it loses its meaning.
Now, I’m not fully convinced the IA has this right. In their guidance, they highlight the video script wording below as an example of an ‘effective’ contextual approach:
“Why should you invest? Well, investing gives your money a chance to grow faster than inflation and we know how much that has hit. Just look at the cost of a takeaway coffee now versus 10 years ago – that's inflation. Your investments can lead to greater returns than a regular savings account, especially when you hold those investments for 5-10 or more years. But, the value of your investment can go down as well as up, so make sure to have a cash safety net for any emergencies (like a boiler breaking) so you will not have to dip into your investments early. And make sure any high interest debts are also paid off before getting started. You'll also need to understand things like what you're investing in and how much risk you're willing to take – are you in a position to take more risk for the possibility of a greater financial reward, or a lower risk option that gives you more peace of mind but might not grow as much. With investing, there's something for everyone.
What they’ve done is wrap the same “the value of your investment can go down as well as up” risk warning in a cosy blanket of context. I’m not sure there’s anything innovative or engaging there. It also feels pretty long-winded for a script. But what do I know?
What will most investment firms do?
For product summaries, most firms will likely resist the temptation to innovate, choosing instead to default to the most standard language possible. But in my experience, compliance teams recognise the tension between plain language and the precise language required to capture the complexity of most investment products.
Moreover, that standardised language approach runs counter both to the FCA’s recommendation to innovate and engage, and to the IA’s determination for firms to resist formulaic approaches when talking about risk. Industry cliches simply don’t do a good enough job of helping investors understand what they’re really getting into.
What should firms be thinking about?
Retail investors, both before and after they’ve decided to invest, will see a host of investment-specific literature – factsheets, commentaries, quarterly updates, etc. If the product summary is changing, and Consumer Duty expects everything a firm publishes to support investor understanding, those changes will have a ripple effect across everything else. The risk of inconsistency – and therefore potential confusion and non-compliance – magnifies.
Rather than approaching product summary documents as an individual exercise, firms should be thinking about how more contextual approaches, that truly put the investor – their behaviour and their responses to risk warnings – at the forefront. They then need to look at all of their literature with this fresh approach and make sure language is consistent and aligned across everything published.
It’s a challenge, and I’m not sure the industry has fully grasped the significance of it yet. But there’s still time to put some of your existing client-facing literature in front of a professional writer – I’m talking about me, in case that’s not plain English enough – to help find the missing context, eliminate that internal jargon that the people in your building can no longer see, and come up with language that’s applicable and meaningful across all of your literature.
