Emotional responses to financial information

Posted on Nov 12, 2014 in Finance

According to the recent Edelman Trust Barometer (2013 Annual Global Study: Financial Services Industry Findings), U.S. trust in financial institutions is at a low of 46%. In other words, 54% of Americans do not trust financial institutions. Much of that mistrust is likely a result of the financial, worldwide crisis of the past seven years. However, current financial information still tends to be jargon-filled, overly complex, and violates many of the guidelines for plain language.

In a time and in a nation filled with financial distress and apprehension, Americans have been told that trust ­– confidence in the financial system and its institutions, public and private — is key to a recovery. However, weaknesses in the design of key financial documents can raise investor apprehensions, and erode trust and goodwill because people read not primarily with their intellectual or logical brain, but far more with their emotional brain.

Trust is a vital element in financial decision-making, whether one is turning a check over to a banker or asking a broker for investment advice. Even as early as 2002, a consumer study reported that, “Trust remains the most ‘essential’ quality for a financial services firm, outranking performance.” Investor trust” means:

“The decision to put the money in some kind of investment is fundamentally a trust decision… The person making the decision has to trust that the counterpart will act in his or her best interest.” (Sapienza and Zingales)

The relationship between trust and the quality of written information in financial documents has been noted both by academic and industry research. If a firm advocates for its clients, they will reciprocate with their trust, loyalty, and purchases — either now or in the future. This loyalty comes when firms provide
 clients with open, honest, and complete information that they can understand. In a report on survey results of 1200 investors/homeowners, it was discovered that 84% of the respondents did not trust companies that used a lot of jargon.

The issue of written communication and trust is directly related to the complexity of documents. In a recent study conducted at Stanford University, students were asked to read the same information presented in three levels of complexity from relatively simple to moderately complex to extremely complex. The results revealed that the more complex the writing, the less respect the readers had for the writer. Thus, we can conclude that the quality (understanding and taking action) of written communication either contributes to, or detracts from, the trust an individual has in a financial institution.

Information design and plain language are not only about creating documents that make it easy to find, understand, and act on the information, but also about creating documents that are emotionally satisfying.

—adapted from the article From Chaos to Clarity: Overcoming Negative Emotional Responses to Financial Information by Deborah S. Bosley for INTECOM, February 2014

deborahAbout the Author: Deborah S. Bosley us the Owner and Principal of The Plain Language Group. The Group believes that “good writing is good business.” They work primarily with financial institutions to create information customers can easily understand and use.