Making Disclosures Innovative

Nov 1, 2017 1:27:59 PM

Let’s be honest. Not all organizations WANT disclosures to be understood. If you’re a part of an organization that wishes to continue to exploit consumer misunderstanding, you can save yourself some wasted time and stop reading now. But if you’re interested in improving understanding and customer trust, please read on.

From software licenses to data privacy policies to financial agreements, often companies benefit from individuals either not reading or not understanding information that is disclosed. Those who do read them and take the time to understand them are usually those who are least vulnerable.

Regardless, most disclosures can be quite misleading. For example, the term ‘privacy disclosures’ often implies that information is kept private, but in fact are more often notifications about how information will be shared or is publicly available. In some cases, disclosures substitute for more effective methods of ensuring understanding and engagement with customers. For example, when my husband and I were buying an annuity, in spite of the fact that the brochure and explanation of the investment was fairly straightforward, the 40 page contract that we were asked to sign was not. It also appeared to have language that conflicted with what we initially understood. Rather than work to make their contracts more clear, the insurance firm simply offered weak apologies for poorly written agreements.

What I found is that this is not an uncommon occurrence.

Innovative disclosures

But it doesn’t need to be this way. The following are some ideas about how to make disclosures more effective:

1. Let’s begin by looking at who is in the room when disclosures or contracts are drafted. I suspect lawyers and compliance officers; people whose job is to protect the organization. However, a truly innovative idea is to employ a consumer advocate in your organization to contribute to the development of disclosures. Their job is to remind the organization that ‘customer experiences’ are not limited to a call center, retail store, web site, sales agent or advisor. It includes ALL customer touch points with your organization - and contracts and disclosures are an important part of this experience. In particular for financial products and services. An advocate’s point of view is sure to influence new ways of communicating important information and foster a better balance between protecting your organization and serving your customer.

2. Leverage the best in technology to communicate with customers in ways that THEY want to connect. While there is no substitute for ‘in person’ connections, our world is becoming ever more mobile. It seems that cell phones may well be attached to our bodies given the ever-growing application they serve in our lives. So, whether communication is over the phone, automated systems, text, or web, make sure that all disclosures are mobile-enabled. In addition, technology should make communications of any type more efficient. No one enjoys having to provide the same information over and over as they get passed from one person or system to another. A seamlessly integrated systems is mandatory.

3. Begin to embrace the concept of ‘layered disclosures’, meaning that the most important terms, costs or concepts are simply and clearly stated and connect, using hyperlinks, other electronic navigation tools or references to the longer written statements. This approach enables easy visibility to important terms, costs or risks in simple language, should the longer agreements go unread. This approach challenges organizations to get clear on which terms MUST be highlighted (a few as opposed to everything). It may also be sad news for the lawyers reading this, but overly long, convoluted sentences and complicated words actually make it harder for customers to gain understanding and trust. Find ways to simply, succinctly convey ideas and important information. An example regarding terms for a financial investment is:

‘You understand that 5.0% of your investment will be used to pay sales commissions and that of your $25,000 investment, you will have $1,250 less invested. Should you sell this investment, you will not receive the sales commission back. In addition, this investment will need to produce returns in excess of 5.0% for you to have made a return.’

OR [for situations where there are ‘back end fees’]

‘Throughout the time that you are invested in ABC Fund, a fee of 1% of your assets will be charged yearly. In addition, should you choose to sell this investment before the end of 5 years, fees in the amount of 4% of the asset value at that time will be charged.’

4. Whenever possible, use clear comparisons. The following is an example involving a 401k rollover:

‘You have the option to leave your 401k plan investments in your current plan and pay an average of 1.3% of your total investment value yearly in fees or you can roll your investment into an IRA which charges a fee of 4% of the investment upfront, but will not incur additional fees ongoing. For $50,000 in assets, this equates to $650 per year versus $2000 paid once.'

5. Use objective 3rd parties, when appropriate, to confirm that your customers are receiving AND comprehending important information. Data that they gather can shed light on areas of your organization that need refinement or improvement. Most businesses can do a better job of complying with regulatory or other business processes, and providing transparent communications.

For a more in-depth look at how our compliance solution, Aprisi Assure, can help you obtain "evidence of comprehension" that builds trust with your clients, and reduces the risk of regulatory compliance investigations and litigation download the whitepaper, From Disclosure to Comprehension: Mitigating Risk in a Fiduciary World.

Annette Quintana

Written by Annette Quintana

Annette Quintana is the CEO of Istonish Holding Company, a privately held, Native American- and Latino-owned information technology services company established in 1990. Headquartered in Denver, Colorado, Istonish helps organizations, individuals and communities to be great through innovative technology solutions. Annette’s unique capacity to inspire her team to deliver successful results stems from her enthusiastic commitment to this vision. Under Annette’s leadership, Istonish has grown and evolved to serve government agencies, private companies large and small, and mission-driven not-for-profit organizations throughout the Mountain West.

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