I would have thought so along with other believers in nudge. However, this paper by John Beshears, James Choi, David Laibson and Brigitte C. Madrian says not really. They conduct a laboratory experiment amongst Harvard University Staff and do not find evidence that people make better financial choices:
We use an experiment to estimate the effect of the SEC’s Summary Prospectus, which simplifies mutual fund disclosure. Our subjects chose an equity portfolio and a bond portfolio. Subjects received either statutory prospectuses or Summary Prospectuses. We find no evidence that the Summary Prospectus affects portfolio choices. Our experiment sheds new light on the scope of investor confusion about sales loads. Even with a one-month investment horizon, subjects do not avoid loads. Subjects are either confused about loads, overlook them, or believe their chosen portfolio has an annualized log return that is 24 percentage points higher than the load-minimizing portfolio.
Hmmm.. I am actually not surprised with overall results though am surprised that it does not show any positives. Only thing summary prospectus helps is in making quicker decisions which later analysis reveals is not really great as far as financial choices are concerned. What is worse is the confusion over entry loads continues despite simpler information layout.
I recall SEBI also thinking about summary prospectus (am not sure whether it has been passed). Though, it is a lab experiment, so we can never really assume it to hold in all cases. But it provides a food for thought as it has interesting and challenging findings.
I often think about this dilemma policymakers have- on one hand try and help people make better fin decisions by using nudges like simple prospectus etc. But on the other hand the financial decision making (even basic simple stuff) appears to be quite difficult for general public and the policy changes don’t really help. And this is not just for general public. I have seen people working in financial industry also struggle in making financial decisions. However, this does not imply policymakers don’t try.
I am hopeful more such studies are carried to get some more understanding of the broad issues on what works and what does not.