Ever since drugmakers started advertising prescription medicine to the public, we’ve grown accustomed to vast amounts of legal disclaimer. We hardly even notice that bit about the seizures because we really want to eat fried cheese without getting heartburn.
Now it’s the financial services industry. Legal disclosure about potential risk dominates advertisements for financial products.
Ten years ago, you might have seen an advertisement for a mutual fund with disclaimer in tiny print, like this:
Example 1: Not Enough Disclaimer
That was bad. We don’t want to go back to those days, where you could promise just about anything as long as you included some 6-pt. disclaimer.
But now it looks more like this:
Example 2: Too Much Disclaimer
Neither is effective. The first makes the risk too easy to overlook. The second overwhelms with information about risk and is therefore ignored.
There are better examples in other industries. I think the MPAA Ratings system is pretty good:
And the Department of Homeland Security’s threat level chart — though widely ridiculed — is at least fairly simple.
Most people benefit from visual aids.
So what if we developed a rating system for investors that was easy to understand at a glance? It might look something like this:
|The fund is not insured by the federal government.
||An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
|The fund invests in emerging/foreign markets.
||Investment in foreign securities involves greater risks than U.S. investments, including political and economic risks and the risk of currency fluctuations.
|The fund invests in small or mid-cap companies.
||Prices of small-cap stocks may respond to market activity differently from and can be more volatile than those of larger, more established companies. Small-cap companies are more likely to have more limited product lines, fewer capital resources and less depth of management than larger companies.
Run by Monkeys
|The fund is non-diversified.
||The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified which involve fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund.
|The fund invests in only one sector, such as energy.
||The Fund is subject to the risk that stocks that comprise the energy sector may decline in value, and the risk that prices of energy (including traditional sources such as oil, gas or electricity) or alternative energy may decline.
|The fund invests in large-cap companies.
||Large-cap companies may be unable to respond quickly to new competitive challenges, such as changes in technology, and also may not be able to attain the high growth rate of successful smaller companies, especially during periods of economic expansion.
Headed for Extinction
|The fund invests in Value stocks.
||The market may not recognize a security’s intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced.
What some call “value,” others call a $4 cup of coffee.
||The Fund, while expected to track its target index as closely as possible, will not be able to match the performance of the index exactly. It is not possible to invest directly in an index.
Cheese Maze Ahead.
(Many thanks to designer Robert Brown. More on him below.)
By implementing a visually snazzy ratings system, we could start seeing new and improved ads like this one:
Example 3: Just Right!
About the Designer
Robert Brown, 25, was born in Jackson, MS and lives near Huntsville, AL. He’s always loved photography and computers and thought it would be convenient to combine the two into a career. He’s been doing freelance design and photo work since he was 16, and currently teaches design as part of the Visual Communication Faculty at ITT Technical Institute in Madison, Al. For case studies on past work, as well as any banter on his mind, visit Robert’s website: http://browneagle44.wordpress.com.