Broadridge Study: FCA Disclosure Rules Limit Customer Understanding

Broadridge released research findings indicating that legacy financial disclosure requirements in the United Kingdom may be limiting customer understanding of financial communications, despite most customers perceiving the information as clear. The study, based on a controlled trial of UK savings customers, found that comprehension levels remained low under existing formats, raising questions about how firms meet Consumer Duty obligations.

Legacy Communication Formats Linked to Low Comprehension

The research tested how customers interpreted standard financial communications compared with redesigned versions using behavioral science principles. In the control group, only 15% of participants were able to answer key questions correctly after reading the original material.

At the same time, more than 80% of participants described the communications as clear, fair, and easy to understand. This contrast highlights a disconnect between how information is presented and how it is processed by customers.

The findings suggest that existing disclosure formats, often shaped by regulatory templates, may not align with how customers absorb information in practice.

Behavioral Design Improves Understanding

The study showed that redesigned communications led to higher comprehension levels. A version developed using behavioral principles more than doubled the proportion of participants who understood key information.

Further improvements were seen when personalized numerical examples were included. In those cases, understanding of the consequences of inaction rose from 32% to 59%, representing the largest increase observed in the trial.

These results indicate that changes in structure, presentation, and personalization can influence how effectively customers interpret financial information. The use of concrete examples appears to help users connect abstract concepts to real outcomes.

The research also highlights a broader issue in financial communication, where compliance with disclosure rules does not necessarily lead to effective understanding.

Firms Face Tension Between Compliance and Clarity

According to the study, communications teams within financial institutions report challenges in balancing regulatory requirements with the need to produce clear and accessible content. Prescriptive templates and governance processes were cited as constraints that limit flexibility in how information is presented.

This tension reflects the complexity of meeting Consumer Duty standards, which require firms to deliver good outcomes for customers while adhering to existing rules.

Emily Gore, Vice President Business Development and Strategy at Broadridge, commented: “This research makes clear: legacy rules do present barriers to customer comprehension. If customers don’t truly understand the financial implications of their actions, or inaction, we risk falling short of Consumer Duty’s core purpose. By applying behavioural science, firms can dramatically improve understanding and drive better customer outcomes. Firms that move early, the report suggests, will not only meet regulatory expectations, they will gain competitive advantage through stronger customer relationships.”

Broadridge’s report recommends that firms take a structured approach to improving communications, including the use of behavioral frameworks and clearer governance processes. It also suggests that industry participants continue to engage with regulators to address potential conflicts within existing rules.

Regulatory Implications and Next Steps

The findings may add to ongoing discussions about how financial disclosures are designed and regulated in the United Kingdom. As Consumer Duty requirements place greater emphasis on outcomes, the effectiveness of communication becomes a central factor in compliance.

The report calls for further efforts to review and simplify legacy requirements, as well as the development of internal capabilities within firms to manage and improve communications. This includes establishing dedicated teams and tools to monitor how information is delivered and understood.

For firms, the implications extend beyond compliance. Improvements in communication can affect customer trust, engagement, and operational efficiency, particularly in areas such as onboarding and product disclosure.

The research suggests that aligning regulatory requirements with behavioral insights could improve outcomes, but achieving that alignment will depend on how both regulators and firms respond to the evidence presented.