Disclosure effectiveness in the financial planning industry

Scandals in the Australian financial services industry highlights the conflicts of interest between those who provide financial advice (financial planners) and their clients. Disclosure is a potential governance tool to manage these conflicts of interest by reducing asymmetries in information. Yet, the efficacy of disclosure is questionable as scandals persist, so we research the effectiveness of disclosure in financial planning. This research used a qualitative approach involving the triangulation of data from parliamentary inquiries in financial services with data collected in semi-structured interviews with financial planning professionals. The findings draw a clear portrayal of the disclosure requirements and illustrate how disclosure processes are onerous and complex. Starting with detangling the complex interactions between the beneficial role of disclosure in reducing information asymmetry and unethical behaviour and the detrimental effect of information overload, we then highlight effective disclosure techniques utilised by financial planners, including visualisation of material information. Our study reveals that financial planners perceive their role as filtering information for clients and ensuring clients’ comprehension, due to the onerous disclosure requirements. The study is of interest to researchers, practitioners, policymakers, and society as it implies that how disclosure occurs is as important as what information is disclosed. Those who wish to foster effective disclosure in the financial services industry need to consider the quantity, quality, and process of disclosure. A limitation is our research focuses on financial planning practices and not client outcomes, which could be considered in future research. The study adds to the understanding of how disclosure is utilized as a governance tool, and how the quantity of information may impede the effectiveness of disclosure in the financial planning industry. In addition, the study identifies and elaborates on the influential factors and best practices for enhancing the disclosure effectiveness by financial planners.