Back in 1998, the U.S. Securities and Exchange Commission (SEC) published “A Plain English Handbook” to help the financial industry simplify documents both online and in print.
Riddled with jargon, unnecessarily long words and run-on sentences, “educational” material often left investors confused and even suspicious, instead of empowered. After all, when a person trusts someone with managing their life savings, transparency should be a given. Providing clear and simple answers to clients’ questions doesn’t seem like much to ask, but doing so is apparently harder than it seems.
Even famed investor Warren Buffet offered some advice in the handbook’s preface:
“Write with a specific person in mind. When writing Berkshire Hathaway’s annual report, I pretend that I’m talking to my sisters. I have no trouble picturing them: Though highly intelligent, they are not experts in accounting or finance. They will understand plain English, but jargon may puzzle them. My goal is simply to give them the information I would wish them to supply me if our positions were reversed. To succeed, I don’t need to be Shakespeare; I must, though, have a sincere desire to inform.”
Well written, Mr. Buffett.
However, despite that handbook—and newer regulations that require all U.S. Federal agencies to communicate so the public can understand—have done little to break down the language barrier between professionals and laymen.
- Federated Investors
- DIAM International
- Boston Partners
- Putnam investments
- Caisse de depot et placement du Quebec
Here’s the ugly proof. VisibleThread, a content quality management company, recently released its 2016 Asset Management Website Clarity Index recent report. The study reviewed up to 100 pages each from 85 asset management firms. Unfortunately, it revealed that 98 percent of the companies failed to meet clear language standards based on the following criteria.
Readability –When explaining financial concepts, there’s simply no room for elaborate vocabularies. Based on research from the National Adult Literacy Survey, the average U.S. adult reads at a 9th grade or 14-year-old level. The Flesch-Kincaid reading ease test scores content out of 100 based on factors like short sentences, one-syllable words, etc. College graduates best understand a score of 30 or below while 12-year-olds do best with content scored 60 or above. For example, Reader’s Digest has a readability index of 65, Time magazine comes in at 52 and the Harvard Law Review in the low 30s.
Just one firm studied, Putnam Investments, hit the target readability index score of 60 or higher with a 61. Vanguard Asset Management scored 55.
Passive Language – Using a passive voice can put readers to sleep. Active language keeps them engaged and interested. For example, you can write, “Investing in mutual funds is a smart way to diversify your portfolio”. Or, you can say, “Mutual funds provide less risk for investors needing diversification”.
Sixteen of the websites analyzed (18.8 percent) met the target Passive Language score of 4 percent. Articles on the DIAM International website were almost all written in the active voice, followed by the MEAG, with just 1 percent of its content in the passive voice.
Long Sentences – Expressing only one idea per sentence can really simplify articles. Long, complicated ones can suggest a writer’s lack of direction or purpose. Shorter sentences better convey complex information; they break the information up into smaller, easier-to-process units.
Here’s an example from “A Plain English Handbook”.
|Once the candidate’s goals are established, one or more potential employers are identified. A preliminary proposal for presentation to the employer is developed. The proposal is presented to an employer who agrees to negotiate an individualized job that meets the employment needs of the applicant and real business needs of the employer.||Once we establish your goals, we identify one or more potential employers. We prepare a preliminary proposal to present to an employer who agrees to negotiate a job that meets both his and your employment needs.|
The VisibleThread report found that only one company, Federated Investors, met the long sentence target of 4 percent followed by MEAG, with just 9 percent. The remaining Asset Management sites ranged between 9 and 50 percent. Manulife Asset Management’s website used the highest percentage of long sentences. Although less than 15 words per sentence is ideal, more than half of its website content used sentences with 25 words or more.
Word Complexity Density – Complexity is the greatest enemy of clear communication, but it might take a little extra effort to translate complicated messages into easily understood ones. Vocabulary choice is an important part of communicating clearly.
While it’s OK to be expressive, most financial writing has no place for literary flair. People do not curl up in bed with a nice prospectus to have a relaxing read.
H.W. Fowler summed up these recommendations for making word choices in his influential book, The King’s English, first published in 1906. He encouraged writers to be more simple and direct in their style:
- Prefer the familiar word to the far-fetched.
- Prefer the concrete word to the abstraction.
- Prefer the single word to the circumlocution.
- Prefer the short word to the long.
- Prefer the Saxon word to the Romance word.
In the study, La Banque Postale Asset Management and Caisse de depot et placement du Quebec came first and second in the complex language category. Their websites consistently used simple sentences throughout. Principal Global Investors and Northern Trust Asset Management trailed by a clear margin in this category, demonstrating the need for significant improvement.
“The asset management sector has been guilty of using confusing and overly complex language for many years,” wrote Fergal McGovern, CEO of VisibleThread. “Our research on 85 randomly selected websites shows that asset managers have largely ignored good practice. They continue to confuse website visitors and repel potential customers.”
McGovern also expressed his disappointment with the lack of progress, adding that by improving just one of the above four key areas would greatly affect overall readability. That would ultimately translate into happier, more informed clients and websites that attract—not deter—new business.
So now what? Whether you write content for an asset management firm or you run the operation top to bottom, you’re not alone; nor without help. You can choose from a simple readability tool on Microsoft Word, free online tests, or pay companies to review your entire website and present solutions.
It also might be interesting to see the top asset management firm websites as labeled by VisibleThread (see previous box).
And, just an FYI … only 4 percent of this article used passive language; it scored 44 percent on the Flesch Reading Ease scale and a Flesch-Kincaid grade level of 10.
This one passed the test, will yours?