• People thought conflicts would not impact them: Most participants understood that conflicts of interest were present in both the brokerage and the advisory accounts and that these conflicts took the form of payments that created incentives to recommend certain products. However, few made a connection between the conflicts described and the possibility that they could result in recommendations that were not in their best interests.
“I’m confused by this section because I thought they were listing the conflicts of interest that they’re not allowed to do. But now that I’m reading this section, it sounds like this is what they’re allowed to do. Wow! That’s a little concerning.” —Philadelphia investor.
Despite favorable testing conditions that required investors to read the documents more carefully than most would on their own, few participants were able to consistently comprehend the information within a single section of the CRS, according to the advocacy groups. Fewer still were able to integrate and synthesize the information provided in the document as a whole, Kleimann found.
Maureen Thompson, CFP Board vice president of public policy, who also represented the Financial Planning Coalition at the press conference, said the study’s $45,000 tab “was a small cost to get some clarity and information.”
Despite the test's findings, the groups wrote in their letter to the SEC accompanying the research results that they “share the conclusion expressed by Kleimann Communications that a ‘usable document that communicates clearly and well with potential investors is a viable outcome.’"
“The SEC has a lot riding on this,” Roper said. “Its entire approach is that consumers should be able to choose. But choice is only meaningful if it is informed choice. The SEC needs to do rigorous usability testing.”
The formal comment period on the SEC’s regulatory proposal ended August 7. The SEC did not immediately respond to a request for comment.