by Tony Vidler
When describing the ideal communication to clients we often refer to the words used by the regulators, or law, to guide us. A consistent, idealistic, principle continues to be promoted which says client communication must be clear, concise and effective. Nothing very new in that really – we’ve all heard that before.
But here is the new thought (for me at any rate), for which I must credit Sean Hughes, Chief Executive of the Financial Markets Authority, NZ. He’s THE main man when it comes to regulation in NZ, so it always pays to listen when he speaks. And it was certainly worth listening on this occasion especially.
Last week during a presentation he made a superb point, which consisted of a subtlety that most of us had not really thought through as far as I am aware.
When we talk of client communications being “clear, concise and effective” we have a tendency to apply a meaning to the entire phrase, rather than to the individual words themselves. And the three words have quite different meanings, that may actually counteract each other occasionally.
1. Clear – to be plain; free of doubt.
2. Concise – succinct; brief.
3. Effective – producing the intended result.
So these three words as used by regulators actually suggest an ideal outcome. Pragmatically though perhaps not all three are always possible. To be effective perhaps you cannot be concise. To be concise perhaps you cannot be clear. To be clear perhaps you cannot be concise. And so it goes on…
Perhaps it is this very confusion that has led to the proliferation of Statements of Advice (SOA) for clients beginning to resemble a rather large and monotonous draft of “the reflections of a recluse”. Is it any wonder many consumers disengage from the advice process at the first sight of such a tome?
Once the distinction is understood it follows quite logically that if not all objectives can be met then there must be a clear priority to which the other requirements become secondary. Which of the three objectives is the priority?
Using language that your client understands and can follow. Producing written advice that can not only be followed and understood by the person for whom it is intended, but which is also most likely to produce the intended (or desired) result for the client.
To be truly effective there would be minimal jargon, and no unnecessary technical information. It would be personalized – it is truly about the clients needs, objectives and achieving their intended result.
The second most important objective must be achieving clarity. The avoidance of doubt is really the benchmark here when you think about “clarity” as an isolated concept. That is, the concept goes beyond merely being clear about the information an adviser might choose to include…it extends to the obligation to include information that the adviser knows the client should have access to – even if the client isn’t aware of that. In other words, achieving clarity in written advice goes beyond simply using plain language. It requires that you use plain language to reveal all the the client has a need to know, whether they asked the right questions or not.
Ideally of course, any written advice would also be brief. “Brief” is a relative concept though isn’t it? A paragraph may be brief…or five pages may be brief…the bottom line really is that the written advice should just be as long as it has to be in order to be effective. But no longer!
Just to be clear – and hopefully effective with this article – I would make the observation that a Statement of Advice for a client should not need the entire client file to be captured within the SOA.
There are any number of documents and notes and records created leading up to the provision of advice to a client, and those records do need to be kept logically, and often referred to within an SOA. That does not mean that a justice-of-the-peace-certified-copy-of-the-original needs to be put into the SOA every time a previous document from the file is referred to.
In order to be effective, your advice should be comprehensive.
But it should also be comprehensible.
THAT is the real benchmark.
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