More is less in client communication

“Regulatory constraints imposed by law necessitate that we communicate all potential actions, including, but not limited to, investment rationale and its potential impact on asset allocation, now and in the future, by verifiable means that will pass muster in a regulatory audit, and obtain informed consent before initiating those transactions…” This was my feeble attempt at imitating Shashi Tharoor. I was using humour to mollify Sarika, a client. She was hassled by the spate of communication from us and investment providers. I was trying to tell her that most of the communication was required by law.

Many interactions occur before a prospect becomes a client. Many more occur after she signs up, and then more while the financial plan is being prepared, a plan of action is charted out, and during the implementation phase. Each interaction gives rise to a cycle of confirmations. The client also receives a spate of communication from the service providers—investment platforms, and also mutual funds and PMS providers, banks, etc.— both before and after a transaction is completed.

No wonder Sarika was hassled. She is a busy professional who, nonetheless, likes to go through all the communication and then take an informed decision. This deluge was preventing her from doing so.

Her confusion reminded me of something Ramesh, a chartered accountant and a longtime friend, had told me two decades ago about how he managed the detailed scrutiny of his clients’ income-tax returns. The tax department used to conduct a roving enquiry, asking for all sorts of details. Ramesh would submit voluminous information. “A tree is best hidden in a forest” was his motto. The tax officials had a tough time sorting out the relevant information from the deluge. They mostly missed the more important things. And this happened to people whose sole job was to audit relevant information.

Sarika’s confusion was justified. Apart from the volume of communication, the difficult language in most official communication poses an additional problem to investors.

All regulators mandate disclosures and providing information to clients so that the latter take informed decisions. As Sarika’s case shows, the results are mostly the opposite of the intent.

A “plain language drafting movement” is underway that aims to create a blueprint for drafting legal documents in a manner that is free from legalese and jargon. The purpose is to make them comprehensible even to laypersons. The United States of America enacted the Paperwork Reduction Act in 1980 to promote plain language in government forms meant for public usage. Similar laws have been passed and implemented in many countries. In India, this movement is in its infancy, though good work in this regard has been done by the New Delhi-based Vidhi Centre for Legal Policy.

One of the progressive regulators should take the lead and at least attempt this simplification and rationalisation exercise. A good first step would be to allow consumers to choose the kind of communication they wish to receive (or not receive) from service providers. The second step would be to penalise those service providers who disregard the consumer’s choice. Language and process simplification can follow later.

For now, we have agreed to limit communication to Sarika to a specific day of the week, and via the mode she prefers. We have also expressed our inability to stop communication from other service providers. Truth be told, any attempt at obtaining informed consent from clients through reduced and simple communication needs regulatory blessings, or rather, push. And in this matter, remember that more information is less—way less.

Sarika likes to go through all the communication she receives and then take an informed decision. She was hassled because this deluge was hindering her