The Levitt test for financial risk disclosures
Do your risk disclosures pass the Levitt test?
In “A Word to Wall Street: ‘Plain English,’ Please,” former SEC chairman Arthur Levitt sets a high standard for your communications about risk.
Levitt says, “For the language of financial disclosure, we need to raise the standard from ‘potentially understandable’ to ‘impossible to be misunderstood.’ ” His article appeared in The Wall Street Journal.
Levitt speaks harshly about the quality of financial communications. “It’s not just that much of this stuff is difficult to understand; it is written not to be understood.”
If you’re used to producing what Levitt calls “an avalanche of impenetrable verbiage,” it will take time for you to learn how to write using plain English.
Improve your disclosures
Step 1. Assess the quality of your communications. Ask if you can realistically expect a non-specialist to understand what you’ve written. Next, test your assumption by asking a representative member of your audience to read and then explain your text in their own words.
Step 2. Download A Plain English Handbook: How to create clear SEC disclosure documents, published by the SEC. It’s one of the best publications for financial writers and it’s FREE.
Step 3. Write, rewrite, and rewrite again. Start your long journey toward improving your financial disclosures. For me, it’s an ongoing challenge. There’s always room for improvement.
Susan, great post. I was discussing this topic last night with a normal person, someone who is not in the industry!
They asked why everything in the investment world is so complicated and wondered why plain, simple, easy-to-understand language is not required.
Trust will not be restored on Wall Street until the average investor is able to quickly understand the products and services offered by professionals. Thanks for the tips!
Thanks, Paul! The more that financial professionals achieve clarity in their communications, the better off investors will be. So I’m happy to have people like you on board.
Anyone who enjoyed this post, may also enjoy the video I link to at http://investmentwriting.com/blog/2010/11/reader-challenge-what%E2%80%99s-the-writing-lesson-from-physicians-mutual/