Simplifying Paperwork

Big brokerage firms are starting to clue in that people are overwhelmed by the amount of paperwork and disclosures they have to deal with. Firms trying to make correspondence in "better English" are Bank of America, Morgan Stanley, Wachovia and Smith Barney (Citigroup). Excerpt from the WSJ below:

Wall Street Aims to Simplify
Disclosures for Clients
By JAIME LEVY PESSIN
October 31, 2006; Page D2

NEW YORK -- New Morgan Stanley customers will no longer have to read through 14 documents -- amounting to 136 pages -- to get their accounts running. Soon, their financial advisers will hand them a single, 48-page document.

Streamlining efforts like Morgan Stanley's are under way at several Wall Street firms, an acknowledgment that firms -- while satisfying a legal obligation to disclose information -- aren't necessarily informing or educating their customers.

The brokerage industry has an obligation to make multiple disclosures to their clients. Product prospectuses, possible conflicts of interest and the distinctions between fee-based brokerage and advisory accounts, among other things, must be disclosed at various stages of brokerage and advisory relationships.

Bill Lutz, a professor emeritus at Rutgers University who consults regulators and financial firms on incorporating plain language into disclosures, said he has seen companies lose clients because investors were exasperated by the lack of clarity.

Not only do more-understandable disclosures make for better customer service, he said, they reduce firms' liability in cases where customers claim they don't understand what they have signed.

"People have successfully argued, 'We just didn't understand what you were telling us,' " Mr. Lutz said.