Verbatim Asset Management has had its risk profilling tools approved by the Plain English Campaign, after the Financial Services Authority (FSA) warned of a crack down on jargon when dealing with clients.
The Campaign assesses whether an intended audience is able to read, understand and act upon information the first time they are given it.
Earlier this year, the regulator warned some customer risk descriptions in the risk profiling tools it assessed were "unclear or misleading", adding some contained "technical jargon" which they may not understand.
Verbatim, the asset management arm the SimplyBiz group, has also made changes to its planning tool to identify questions where a client has given conflicting answers.
The FSA has said previously documenting conflicting answers in clients reports is good practice.
Neil Stevens, managing director of Verbatim, said the approval by the Plain English campaign "demonstrates that it is possible to deliver the sort of clarity ordinary people need around financial product advice".
Before and After
Here is how one of the risk profiles was described before:
Selected risk level: 8 - Motivated Investor
A Motivated Investor is willing to accept a higher level of risk on their investment, in return for, higher returns in the long run. They are willing to accept a good amount of fluctuation in the value of their investments as a result. They would feel comfortable if their investments fell in value more than one quarter in one year and would see this as a time to ride out the storm rather than a time to purchase more.
And after, in 'plain English':
Profile 8 - High risk
You have selected profile 8. This means that your attitude to accepting risk is ‘high'.
The risk scale is made up of 10 profiles overall. This means that you are above average in how much risk you want to take in your investments.
Your risk score is important in two ways to the type of investments you should consider. These are shown below.
How comfortable you are with the possibility of losing money on your investments
You are likely to be more comfortable and better able to adapt to losing money on your investments than someone whose attitude to accepting risk is ‘low' or ‘medium', for example, someone in profiles 1 to 6.
How much you want to invest in higher-risk investments to get better returns
Higher-risk investments such as equities (shares) generally offer higher returns over the long term, but the investments also fluctuate more (go up and down in value). This means that while people may make more money in the long term with higher-risk investments, they are more likely to lose money in the short term.
As your attitude to accepting risk is medium-high, you probably concentrate on getting higher returns on your investments. However, you are still probably concerned about too many rises and falls and, as a result, the possibility of losing money.
Because of this, your preferred investment portfolio will contain higher-risk investments such as shares, with fewer low-risk investments such as cash and bonds. Because of this, there is a possibility you may not get back as much money on your investments as you put in, particularly in the short term.
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