As someone who breaks into hives the moment he buys something that contains a set of simple assembly instructions, you can imagine my response to getting the prospectus of a variable universal life insurance product.
It was, I kid you not, more than 50 pages long and when it first arrived, I honestly thought someone had sent me the latest version of J.K. Lasser's Income Tax Guide, it was that large.
I knew a VUL, as it's known, was a type of life insurance that could be invested in a number of accounts, but the dizzying amount of data and Rube Goldberg-like analysis brought me back to my unpleasant summer of taking graduate statistics.
I mention this overload of disclosure only because a report compiled jointly by Big Four firm KPMG and the Financial Executives Research Foundation, a nonprofit affiliate of Financial Executives International found that the volume of disclosure information has increased 16 percent during the past six year
s, while the volume of footnotes has gone up 28 percent.
As someone who first received a securities prospectus in 1985 from a certain Chicago-area company that happens to sell hamburgers, my first reaction to the findings was that I was surprised it was only 16 percent. The mailing I received nearly 30 years ago seemed like a Cliff Notes version.
Apparently one of the top contributors to this current wave of information overload stems from the increased complexity of transactions, investments, financial instruments and other fiduciary relationships.
Now as someone who has covered the profession for more than a decade and had a front row seat to some of the most massive scandals in history, far be it from me to rail against greater disclosure.
But setting aside statement preparers who are more than a little used to poring over footnotes and sidebars, what about the average investor as he/she attempts to navigate, for example, an annual report in an effort to determine if it looks promising enough to park some money for what would hopefully be a leisurely retirement.
The report included several recommendations to the SEC and FASB to address the challenges of complexity and paring down the volume including addressing immaterial items and moving forward with technologies such as XBRL, which would eliminate duplicity and multiple filings.
For the average investor, reading an annual report or prospectus may never be confused with kicking back with a dime-store potboiler, but a less complex and ponderous document would go a long way toward making financial education a bit easier.
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