Do key investor information documents enhance retail investors’ understanding of financial products? Empirical evidence
| Date | 06 May 2014 |
| Published date | 06 May 2014 |
| Pages | 115-127 |
| DOI | https://doi.org/10.1108/JFRC-10-2013-0035 |
| Author | Andreas Oehler,Andreas Höfer,Stefan Wendt |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation |
Do key investor information
documents enhance retail
investors’ understanding of
nancial products? Empirical
evidence
Andreas Oehler
Chair of Finance, Bamberg University, Bamberg, Germany, and
Andreas Höfer and Stefan Wendt
Department of Finance, Bamberg University, Bamberg, Germany
Abstract
Purpose – The purpose of this paper is to analyze whether key investor information documents (KIDs)
provided by suppliers/issuers help retail investors to understand the key characteristics of nancial
products. KIDs are fact sheets composed to describe the characteristics of nancial products in a brief,
standardized and straightforward manner.
Design/methodology/approach – In the empirical analysis, the authors evaluate different versions
of KIDs and examine whether they meet minimum requirements to provide benets for consumers.
Findings – The empirical results suggest that subjects assess KIDs of suppliers/issuers merely as
moderately appropriate to grasp the key characteristics of nancial products. In contrast, neutral
benchmark KIDs are generally evaluated as being superior to those of suppliers/issuers, which at best
meet current legal requirements.
Originality/value – The authors argue that a major reason for these ndings is consumer policy’s
assumption of omnicompetent subjects in line with the neoclassical idea of a Homo economicus. This
assumption, however, is far from being both realistic and practical.
Keywords Behavioral economics, Information asymmetry, Financial literacy, Key investor
information documents, Neuroeconomics
Paper type Research paper
1. Introduction
Key investor information documents (hereafter KIDs) have been introduced to provide
investors with all relevant information of an investment product at a glance, in particular
with regard to associated costs, benets, risks and rewards. These documents are intended
to meet similar requirements as patient information sheets or package leaets provided by
pharmaceutical manufacturers (Oehler, 2009;Podewils, 2011;Oehler, 2012a;2012b). To
foster the “nancial health” of investors, KIDs are proposed to be self-explanatory and
self-sufcient, and they should allow retail investors to grasp all essential elements in one
document which has a predened form and length, is free of charge, regularly updated and
written in plain, nontechnical language (FSA, 2009;Lannoo, 2010). The documents must
JEL classication – D14, G18, P46
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
Key investor
information
documents
115
Journal of Financial Regulation and
Compliance
Vol. 22 No. 2, 2014
pp. 115-127
© Emerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-10-2013-0035
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