I'm coming more and more to the belief that requiring disclosures sounds good but in many situations is largely ineffective.
Where it may be effective is at the macro level. There disclosures are to the public at large, such as campaign contributions disclosures that are of broad interest and there are organizations that do look at and analyze the disclosures. But ISTM that disclosures to individuals are mostly ignored, if they are even read at all.
Mutual fund disclosures (prospectuses) are complex, so you have separate SAIs (that I admit I don't usually read cover-to-cover). But prospectuses were considered too daunting, so Summary Prospectuses were created. IMHO too much information was stripped out of them; regardless, my gut feeling is that most people don't even look at these.
The new DOL fiduciary regulations for retirement accounts let brokers charge reasonable fees (including loads, wraps, etc.) so long as they're disclosed in a Best Interest Contract. But as this
Congressional testimony (p4) explains, DOL officials "concluded that disclosure would likely be ineffective. ... If households do not understand basic financial concepts such as percentages and compound interest and do not know the difference between a stock and a bond, they are unlikely to understand disclosure. But we would go further.
We believe it is unlikely that the disclosures would be read in the first place..." ("We" here is not DOL.)
I see the same problem in other areas. Gone to a doctor's office lately? Been asked to sign a HIPAA notice? Did you read it? Did you even receive it? What you're signing says that you've received and read the notice, though more times than not I've been asked to sign this without having gotten the notice. This is the current level of contempt for disclosures and informed consent.
The failure of disclosures is much broader than just investments. Stronger regulations might help somewhat, but I don't know what the solution is.
Comments
Agree about the desire and/or accompanying knowledge regarding most serious documents to be read; and in particular regarding investments and the "jargon".
The "terms of service" agreements that became so numerous years ago related to computer software/apps and related.........a big OMG. I used to read some of them, but generally not so much today.
As to investments, I do my best to help with sharing my experiences and play the devil's advocate among those I know. The devil's advocate can be a most powerful tool to help folks understand an area with which they are unfamiliar. The most common remark I have heard over many years regarding investments is that the area is not unlike a foreign language study. I tend to agree. Some folks surprise themselves with being able to relate another part of their life and experiences to better understand investing and the options available.
Thank you for sharing your observations.
Regards,
Catch
So we just check the box and hope for the best.
A term I hadn't heard of before is "browsewrap", where you're implicitly agreeing to terms of use of a site merely by browsing the site. This seems to be much less enforceable. That's because the site can't easily show you knew about and agreed to the terms - it's not as though you clicked on "I agree" (regardless of whether you actually read anything).
Found this info on an American Bar Association (ABA) page (January 2015):
From the Chair: "Click Here to Accept the Terms of Service)
"What choice do you actually have?" Reminds me of what SSA says about businesses requiring your SSN. You can choose not to give them your number, and they can choose not to do business with you. Some choice.
This was in a state where one uses lawyers at closings (eastern states tend to use lawyers, western states tend to let real estate agents handle the paperwork). Makes one wonder what the lawyers are doing for you. To tie in another thread: so much for fiduciary duty (due care).