Do key investor information documents enhance retail investors' understanding of financial products? Empirical evidence

Purpose - The purpose of this paper is to 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. Design/methodology/approach - In the empirical analysis, the authors evaluate different versions of KIDs and examine whether they meet minimum requirements to provide benefits for consumers. Findings - The 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. Originality/value - The authors argue that a major reason for these findings is consumer policy's assumption of omnicompetent subjects in line with the neoclassical idea of a Homo economicus. This assumption, however, is far from being both realistic and practical.