We are wrongly attributing the ability to make informed decisions as a matter purely of framing and this I fear may also be another mindless extrapolation of behavioural economic theory.
When I was doing my blog on benchmarks I read the 2009 CSA Point of Sale Disclosure Project: Fund Facts Document Testing.
I did not comment on it at the time, but the document itself has resurfaced in a different context. I have many reservations about these surveys and I think it is time a perspective was served.
These surveys are “experiments” whose results are being inappropriately applied:
It is almost as if they assume that understanding is entirely a question of how information is presented/framed as opposed to other factors such as the experience, process and ability of the investor. It assumes that everyone can make an informed decision but that it is the framing that needs to be calibrated. In other words if you put in an inappropriate frame investors will not be able to decide and hence you need to delete the frame to allow the decision to effect.
This is a skewed reality, because in truth the average investor does not possess the ability to make the necessary informed decision so the frame is immaterial. It is not a question of the frame alone, but a combination of the process the “advisor” follows and a continuing education that will house and own the outcome. Get the process and the education working and the frame will capture the light.
We need to define the process (best interest standards) and provide the supporting education before we can define the frame!