Communicating risk warnings with clients: one size does not fit all

Introduction

Compliant communications are key to advisers, so we asked our compliance team here at Russell Investments to give their top tips in this guest blog post.

Communicating compliantly with clients

Compliance challenges seem to increase every day when we think about how to communicate a product or service to a client. Treating clients fairly, being clear and not misleading needs to be at the top of our agenda. We want to ensure our clients understand our services and products, and that we are not issuing inaccurate, inappropriate or confusing communications. This way we can hopefully win and retain business – while staying on the right side of the regulator.

Less is more

In an ever-changing regulatory environment, it’s understandable that those in the financial services industry constantly worry about the message they are giving to their clients. Unfortunately, this worry can lead to being over cautious which can, in turn, lead to communications which are riddled with irrelevant and confusing risk warnings. It is all too easy to copy and paste a standard risk disclaimer, however what you should be doing is asking yourself: what are the risks? What is it the client needs to know? Less compliance wording will often be more effective.

One size does not fit all

Another common mistake is thinking a communication that is suitable for one client is also suitable for the next. One size does not fit all! Treating clients fairly does not mean treating all clients the same; we should take the time to understand each client and their needs. All clients carry a different level of sophistication and have different goals, therefore should be communicated to appropriately. We should pay greater attention to language and technical jargon and ask ourselves: is this appropriate?

Think greater transparency!

What does the client need to know? How much do they need to know? When do they need to know it? Ensuring the client has all the relevant information, supplied at the right time, should help the client make the right investment decision. This should in turn lead to greater efficiency and less time dealing with complaints. No one wants an unhappy client!

The Financial Conduct Authority has repeatedly asked us to think about the points above and with MiFID II on the horizon the message from the regulator can only get stronger!