Do Key Investor Information Documents Enhance Retail Investors’ Understanding of Financial Products? Empirical Evidence

In this paper we analyze whether key investor information documents (KIDs) provided by suppliers/issuers help retail investors to understand the key characteristics of financial products. KIDs are fact sheets composed to describe the characteristics of financial products in a brief, standardized and straightforward manner. In our empirical analysis we evaluate different versions of KIDs and examine whether they meet minimum requirements in order to provide benefits for consumers. Our empirical results suggest that subjects assess KIDs of suppliers/issuers merely as moderately appropriate to grasp the key characteristics of financial products. In contrast, neutral benchmark KIDs are generally evaluated as being superior to those of suppliers/issuers which at best meet current legal requirements. We argue that a major reason for these findings is consumer policy's assumption of omni-competent subjects in line with the neoclassical idea of a Homo economicus. This assumption, however, is far from being both realistic and practical