AARP Eye Center
WASHINGTON, DC—Investors are confused – and may even be misled – by disclosures proposed by the Securities and Exchange Commission (SEC) to help investors choose an investment professional, according to independent testing conducted by Kleimann Communications Group on behalf of AARP, Consumer Federation of America (CFA), and the Financial Planning Coalition.
The research focuses on the Customer Relationship Summary (CRS) form, which is a central component of the SEC’s proposed “Regulation Best Interest” rulemaking package. The CRS is intended to clear up investor confusion regarding key differences between broker-dealers and investment advisers, including differences in the legal standards that apply.
In addition to AARP and CFA, the groups submitting the results to the Commission Tuesday include Financial Planning Coalition partners CFP Board, Financial Planning Association (FPA) and National Association of Personal Financial Advisors (NAPFA). “We believe the results of this testing clearly indicate the need for the Commission to revise and retest the content, language, and format of the CRS,” the groups wrote in a letter sent to SEC Chairman Jay Clayton and members of the Commission.
The groups called on the SEC to commit to undertaking a rigorous process to revise and retest the CRS and to delay final adoption of its “Regulation Best Interest” regulatory package until it can be certain that the disclosures that form the centerpiece of that regulatory package work as intended to support informed investor decision-making.
Recognizing the important role that disclosure plays in the SEC’s proposed regulatory approach, the groups commissioned independent disclosure design experts, Kleimann Communications Group, to conduct usability testing of the CRS, using a mockup of the version for dual registrant firms developed by the SEC. The testing consisted of 90-minute, one-on-one interviews with typical investors in three demographically diverse locations.
Key Findings
In short, despite favorable testing conditions that required participants to read the documents more carefully than most would on their own, few participants were able to consistently comprehend the information within a single section of the CRS. Fewer still were able to integrate and synthesize the information provided in the document as a whole.
Despite these serious shortcomings identified by the testing, the groups wrote in their letter that they “share the conclusion expressed by Kleimann Communications that a ‘usable document that communicates clearly and well with potential investors is a viable outcome.’ We offer these testing results as a first step of an iterative process designed to arrive at a final disclosure document that truly works to support an informed choice by investors between different types of accounts and different types of service providers,” they added.
“We believe the results of this testing clearly indicate the need for the Commission to revise and retest the content, language, and format of the forms,” added AARP Executive Vice President Nancy LeaMond. “AARP’s volunteers were present across the country at all of the SEC’s roundtables this summer and they shared their concerns with Chairman Clayton directly as did over 10,000 consumers who submitted comments to the SEC via AARP.”
CFA’s Director of Investor Protection Barbara Roper said “Measured by the standard the Commission itself has identified—does the CRS, as currently designed and drafted, reduce investor confusion and enable informed choice—the answer from our testing is clearly no, it does not. The good news here is that the CRS could be fixed, if the SEC has the will to fix it.”
The formal comment period on the SEC’s regulatory proposal ended August 7. The groups alerted the SEC in their comment letters that they were conducting the usability testing and would submit it as soon as it was available. In keeping with SEC practice, they expect the report to be made part of the public rulemaking record.
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About the Financial Planning Coalition
The Financial Planning Coalition is a collaboration of Certified Financial Planner Board of Standards (CFP Board), the Financial Planning Association® (FPA®) and the National Association of Personal Financial Advisors (NAPFA) – the leading national organizations representing the development and advancement of the financial planning profession. Together, the Coalition seeks to educate policymakers about the financial planning profession, to advocate for policy measures that ensure financial planning services are delivered in the best interests of the public, and to enable the public to identify trustworthy financial advisers.
Contact: Dan Drummond, 202-379-2252 or ddrummond@cfpboard.org.
About the Consumer Federation of America
The Consumer Federation of America (CFA) is a non-profit association of nearly 300 consumer groups that was established in 1968 to advance the consumer interest through research, advocacy, and education.
Contact: Barbara Roper, 719-543-9468, bnroper@comcast.net or Micah Hauptman, 202-939-1004, mhauptman@consumerfed.org.
About AARP
AARP is the nation’s largest nonprofit, nonpartisan organization dedicated to empowering Americans 50 and older to choose how they live as they age. With nearly 38 million members and offices in every state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, AARP works to strengthen communities and advocate for what matters most to families with a focus on health security, financial stability and personal fulfillment. AARP also works for individuals in the marketplace by sparking new solutions and allowing carefully chosen, high-quality products and services to carry the AARP name. As a trusted source for news and information, AARP produces the nation's largest circulation publications, AARP The Magazine and AARP Bulletin. To learn more, visit www.aarp.org or follow @AARP and @AARPadvocates on social media.
Contact: Josh Rosenblum, 202-434-2560 or jerosenblum@aarp.org.