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Financial Planning: How to Properly Disclose Information

Suresh Sadagopan CFP IndiaBy Suresh Sadagopan, CFP

Have you ever bought an insurance policy? When you purchased it, did you go through the four pages of fine print and understand everything? If you are like most people, you wouldn’t have even opened the envelope in which the insurance policy was sent to you in!

Let’s try again… did you at least read the half page of fine-print in the brochure? If you didn’t even notice the fine print, don’t worry; you are in good company.

When clients talk to financial services professionals, it isn’t for fun. Usually, clients want to get the conversation over with as quickly as possible without being rude. Do clients read all the material they are handed after their appointments? No. Most likely, they will go to their kids soccer game, their newspaper, or some other thing that is more interesting and forget about the brochure until the financial services professional calls them again.

So, how do clients make their decisions? They listen to the financial services professional for 10 minutes with glazed-over eyes trying to hold back their yawns. Then, they ask the professional, “What should I do and what product do you suggest for me?” The professional launches into a sales pitch and at the end of the pitch, pushes forward an application form. It is signed, the professional is paid and the two people never have to see each other again! Another sale made – fine print be damned!

So, how do you make your disclosure understandable for your audience?

Setting the Intention

Disclosures mandated by law are always complied with, without the intended beneficiary being protected. Lawyers are paid to write disclosures to convey the risks of the product and at the same time make sure the people reading the document can’t understand it. Disclosures are also made to fend off frivolous litigation and this will probably not change any time soon. Some companies make their disclosures lengthy so that they can hide the “catches” or the “mines” in the middle. Clients don’t want to read through long-winded documents of closely printed prose.

In the past, the statutory warning on cigarette cartons used to be so small, you could only read it if you were a hawk. Obviously, it did not serve the purpose it was supposed to.

The first thing you should do when forming a disclosure is set your intention to genuinely enlightening the consumer about what they need to know – good and bad. If one starts with this premise, the disclosure will make sense to the audience.

Disclosures Should be Readable and Concise

Written disclosures aren’t very successful because a lot of the time people don’t read them, and disclosures which are not read are as useful as an umbrella without the protective cover. If we want our disclosures to be useful, we have to go out of our way to help clients understand them. They should be written in layman’s terms, compressed to less than 10 points, and delivered in writing and verbally. Furthermore, disclosures should be crisp and to the point. They should not include frivolous terms that don’t add value and make the disclosure lengthy and daunting.

If you do these two things, your clients will trust you and realize that you are not hiding anything. In our business, trust is paramount. Voluntarily offering information that could potentially be a deal breaker might seem difficult at first, but it is amazingly empowering – try it out. Your clients will be thrilled to have you as their planner because you are their knight in shining armor in a land crawling with crooks.

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