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Allan Gray speaks plainly to investors

19 January 2009 Allan Gray

One of the greatest challenges financial services companies face is ensuring that investors understand what they’re buying. To this end, Allan Gray has undertaken an extensive revision of its documentation, re-writing it in ‘plain English’ to make it more accessible to investors.

“Plain English is not a new dialect or a 12th official language,” says Shannon Edwards, marketing manager at Allan Gray. But legislators and consumer protection lobbyists are working hard to ensure that it’s the new official language of consumers. The new Consumer Protection Bill, for example, requires that an ordinary consumer with ‘minimal experience as a consumer of the relevant goods and services should be able to read and understand the content and significance of a company’s documents.

Edwards says the requirements of the FAIS (Financial Advisory and Intermediary Services) Act support this by aiming to ensure that investors understand what they buy and that there is a record of this understanding.

“Plain English is about transparency, simplicity and acting in investors’ best interests,” says Edwards. “Investing is complicated enough without the jargon that normally accompanies it,” she says. “Even for those of us who work in the industry, the complexity of the information can be daunting.”

Edwards believes plain language will promote investor confidence by reducing confusion and building trust. “The easiest way to lose an investor’s trust is to create false expectations through complicated communication.”

As proven by the financial crisis last year, many investors are simply not equipped with the information or expertise to deal with or question the assumptions inherent in complicated products and in the scenario planning on which many products are based.

“Plain language begins to address the imbalance of power between consumers and financial institutions. We need to work harder to make our services accessible and transparent, and play our role in educating and informing investors so that we can establish and maintain trust and credibility,” Edwards says.

“We believe that providing complete, understandable information will translate into more informed investors. This means less opportunity for any mismatch in expectations and, ultimately, better investment decisions,” Edwards concludes.

Allan Gray’s revised documentation is available from financial advisers, and will be published on the firm’s website, http://www.allangray.co.za/, today.

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