Investors need simpler, easier to understand disclosures that are written in plain English and are provided before the investor hires a financial intermediary, according to the Certified Financial Planner (CFP) Board of Standards Inc., which issued proposed new disclosure language guidelines on Monday. 

The CFP Board outlined its suggestions on how investor language can be simplified in a 12-page letter sent to Securities and Exchange Commission (SEC) Secretary Elizabeth M. Murphy. The SEC is currently conducting its own study on financial literacy among investors.

"We believe that investor education, including timely and effective disclosures, is important to the protection of investors, regardless of who is providing the advice," CFP Board Chief Executive Officer Kevin Keller said.

Keller said many of the additional disclosure requirements recommended by the CFP Board are currently followed by CFP professionals under its Code of Professional Conduct. "It will help investors make key financial decisions including what type of advisor is best suited for them," he said.

Keller said additional disclosures alone are not enough to protect investors and build confidence in capital markets. "That is why we will continue to urge the SEC to adopt a uniform fiduciary standard of care applicable to all who provide personalized investment advice to investors," he said.

In the letter sent to the SEC, the CFP Board recommended that disclosures:

Be required on conflicts of interests (including a financial intermediary's standard of care), fees and costs, background of the financial intermediary and scope of representation.

Be made prior to the engagement of a financial intermediary (i.e., financial advisor, financial planner, broker-dealer)

Be written in plain English, be provided in writing and be made available electronically.

A recent survey by CFP Board, says Keller, showed an estimated 67 percent of all Americans believe that they are solely responsible for their own financial security, including retirement. In addition, 67 percent of survey respondents agreed that the government has a role in protecting investors from fraud and abuse. "This indicates that enhanced investor protections and better information is needed for the individual investor," Keller said..

More than 65,000 individuals  have been certified to use the CFP mark in the U.S.