Let our expert drafting service alleviate your PRIIP burden

The clock is ticking towards 31 December 2016 – the implementation date for the Packaged Retail and Insurance-based Investment Products’ Key Information Document, or the PRIIPs KID. So, there are less than five months remaining before PRIIPs that are sold to retail investors need to be producing KIDs.

Although much attention has focused on the challenges of data sourcing, risk and performance scenarios, one of the most problematic requirements of KIDs is drafting content in plain language that is accessible to the average retail investor. To be truly successful in meeting its objectives, a KID needs to feature content that is accurate, fair, clear and not misleading.

We believe that the challenges of drafting successful investor-facing materials is dramatically underestimated. Across the industry, we see many groups failing to achieve plain language. Drafting ‘by committee’ is often the default – resulting in a ‘belt and braces’ disclaimer approach that will rarely produce an effective investor document.

Plain language reduces word count

The PRIIP KID poses the considerable challenge of capturing the essential features of a fund in a way that meets the letter and principles of the KID regulation. So, copying and pasting from a statutory document source (such as a prospectus or annual report) won’t be suitable because:

  • The required content won’t fit within the maximum three-page KID layout.
  • Content on a KID needs to be engaging and understandable, capturing only the material elements of a fund.
  • Statutory wording tends to be of an opaque, ambiguous style.

In short, it is much harder to draft a concise and focused document than one without space constraints that can cover every eventuality.

The FCA’s call to action

Earlier this year, the Financial Conduct Authority indicated that it is ready to act on the use of jargon and technical terms if the industry does not take proactive action. Its ‘meeting investors’ expectations’ thematic review reinforced its expectation that firms should ensure that product descriptions “are clear and correct because investors…decide whether to invest in authorised investment funds based on this information”. And, in respect of PRIIPs in particular, many groups risk being on the wrong side of a regulatory review. However, our drafting experts can remove this burden from your desks, by offering a cost-effective service to give you peace of mind.

About our service

TFM specialises in product management and investor-facing disclosure communications. Since our launch in 2005 we have worked with over 30 fund management groups, including plain language projects for some of the largest names in the industry.

Our PRIIP drafting service provides:

  • Drafting to ‘best practice’ guidelines, to fit the content on 3 pages
  • Compliant final stage drafting that is ready for your sign-off
  • Specialist drafting knowledge – we have drafted many hundred of UCITS Key Investor Information Documents for clients. We are a member of the Plain Language Commission
  • Proactive engagement with regulators and other entities across jurisdictions, forming the foundation for our service
  • Comprehensive understanding of PRIIP regulatory requirements

To find out more…

For more information, simply contact us at info@technicalfm.co.uk or call 020 7337 2280.


Plain language: how to achieve communications that are easy to read and understand

Plain language and avoidance of industry jargon is not a new requirement for investment communications. However, the investment industry is failing to produce documentation that meets this requirement, i.e. to produce material that is easily understandable to a typical retail customer. Material likely to be impenetrable to the target audience is still all too common, riddled with content likely to confuse and alienate potential investors.

In 2011, research published in the Financial Times looked specifically at the plain language requirement of the UCITS Key Investor Information Document (KIID), plain language being one of the key requirements of the UCITS IV regime, and concluded that many KIIDs were failing to achieve it. Now, some five years later and with UCITS V and PRIIPS KIDs looming, progress has been patchy and the Financial Conduct Authority has stepped in to express its concern about industry use of jargon – not specifically in relation to KIIDs but across investor-facing communications as a whole.In a recent paper on pensions liberation, the FCA said it is ready to intervene if the industry does not take action. Certainly, a review of current UCITS KIIDs exposes many that arguably fail to deliver plain language.

Key to plain language communications is an understanding of the need to avoid terms that are likely to be new to a typical retail investor and to satisfy the space constraints of a two-page KIID or a three-page KID. Yet, across the industry, many asset managers seem locked in an opaque style of drafting that relies on long-winded, technical and legalistic language – and way too much jargon.

So what exactly is plain language? It is hard to define this better than Martin Cutts, the author of the Oxford Guide to Plain English, who states:

Plain language is not just about avoiding jargon. It is about the writing and setting out of essential information in a way that gives a cooperative, motivated person a good chance of understanding it at first reading, and in the same sense that the writer meant it to be understood.”

Use of plain language also involves avoiding words that can mean different things to different people. Wearing an investment hat, there are many words that are in common use that arguably fall under this category, such as: appreciation, denomination, dilution, domicile, equity, erosion, exercise, exposure and redemption. The list goes on and on.

Why is it so hard to draft material that ticks all the plain language boxes? Drafting is a specialist, under-rated skill which many groups are unable to deliver using internal resource. Many seem to adopt a committee, ‘belt and braces’ approach to drafting that is unlikely to produce focused content; in fact, the end result may well alienate the intended audience. Serious consideration needs to be given to what is or isn’t ‘material’ to the potential investor. Honing a communication into a precise, appropriate and focused document in tune with its readership takes more time than producing a much longer document that covers every eventuality.

When the UCITS KIID was launched in 2011, the requirement for plain language was prominent in the Regulation. Since then, the challenge has been to engage the audience by presenting it with language that is not only compliant but which avoids unfamiliar or complex vocabulary. This has also meant avoiding the temptation to cut and paste content from legal documents (such as a fund prospectus). In theory, this presents the audience with a really good chance of understanding the content on its first reading.

At TFM, we have been drafting plain language content for our clients for a number of years. We are well positioned to provide the same specialist service for the PRIIPS KID, which will be in place in January 2017. Plain language reduces word count and that will be an absolute imperative for the forthcoming KID, where the range of products within scope will be broad and space will be tight.


Planning ahead is key for ISA overhaul

The scope of the Individual Savings Account has changed beyond recognition in recent years, as the government has sought to add various tax benefit ‘bells and whistles’ as well as relaxing previous restrictions; this has resulted in the biggest overhaul to ISAs since they were first launched back in 1999.

The Chancellor’s autumn statement in 2014 introduced the concept of the Additional Permitted Subscription (APS), commonly known as the Inheritance ISA. This enables surviving spouses and civil partners to inherit their partner’s ISA tax advantages when they die. The introduction of the Inheritance ISA was warmly welcomed, but getting the service up and ready for 6 April 2015 was a race against time for ISA managers, involving amendments to terms and conditions, new application forms, literature updates and, of course, fresh administrative procedures. Perhaps most importantly of all, the ‘allowance rather than actual assets’ concept of the Inheritance ISA has necessitated detailed staff training as it is quite complex to explain to eligible, recently bereaved applicants.

Hot on the heels of the Inheritance ISA comes the new Flexible ISA facility. This was announced in the March 2015 Budget and is due to become law before the end of 2015, after consultation with ISA managers and other interested parties. Flexible ISAs will be in place from 6 April 2016. In simple terms, this flexibility will mean that investors will be able to withdraw and replace money from a cash ISA during an ISA year. It will apply to both current and previous tax years’ holdings. This is a big change, as it has always been the case that once money is withdrawn from an ISA, it cannot be replaced without counting again towards the annual allowance. While the idea sounds simple, the administration will be much more complex.

As if that weren’t enough, the March 2015 Budget also signalled that savers will be able to put away up to £200 a month towards buying their first property – and the government will boost this by 25%. The Help to Buy ISA is available from 1 December 2015. It will be similar to a Cash ISA, as banks and building societies can set their own interest rates. However, you won’t be able to have a Cash ISA and a Help to Buy ISA in the same tax year, so if you already have a Cash ISA this year, you will have to wait until next April to open a Help to Buy ISA.

Help to Buy ISAs will be available until December 2019 and once you have opened an account, you can keep it (and pay into it) for as long as you wish. The maximum bonus will be £3,000 so, if you save £12,000, the government will boost this to £15,000.There are various terms and restrictions within the finer details and ISA managers will need to understand these even if they don’t plan to offer Help to Buy ISAs.

Other developments include the Innovative Finance (or Peer-to-Peer) ISA from April 2016, which will bring a raft of new providers within the scope of ISA managers, but that could be the subject of a whole article on its own.

TFM offers expert guidance on ISA product literature. If you would like to find out more about any of our services please contact us on 020 7337 2280 or email us at info@technicalfm.co.uk.