From Reading to Insight: Understanding How Customers Interpret Financial Communications

Miggins Lab · 2025-02-13

Most firms know what they have written. Far fewer know how it is read.

This distinction matters. Customers do not consume financial communications as linear documents. They scan, jump, infer meaning and often fill gaps themselves. Two customers can read the same paragraph and come away with very different interpretations of risk, cost or responsibility.

Traditional tools focus on surface indicators: readability scores, length, tone. These help, but they do not explain interpretation. Insight only emerges when you understand what a reader takes away, not what the author intended.

The Interpretation Gap

Financial services communications are written by experts, reviewed by compliance teams, and approved through governance processes designed to ensure accuracy. But accuracy and understanding are not the same thing.

A factsheet might accurately state that a fund's volatility is 12.4%. But does a retail investor understand what that means for their savings? A risk warning might use precise regulatory language, but does the customer reading it genuinely grasp the downside scenario?

The gap between what is written and what is understood is where consumer harm occurs. And it is precisely this gap that regulators are now asking firms to evidence they have addressed.

Why Surface-Level Analysis Is Not Enough

Readability Scores

A Flesch-Kincaid score tells you whether sentence structure and word length are appropriate for a given reading level. It cannot tell you whether a customer understands the concept of compounding, the implications of a dealing spread, or the difference between a platform fee and a fund charge.

Tone Analysis

Knowing that a document sounds "professional" or "approachable" says nothing about whether the customer understood the key message. A warm, conversational tone can still leave readers confused about what they are actually agreeing to.

Word Count and Structure

Shorter is often better, but brevity without clarity can be worse than length. Cutting a paragraph that explains a complex fee structure might improve readability scores while reducing genuine understanding.

A Different Approach: Persona-Based Interpretation

Miggins is designed around this insight gap. Its panel of AI-driven personas reflects real customer diversity, aligned to FCA Financial Lives segmentation, including varying experience levels and vulnerability.

Each persona "reads" communications differently, highlighting confusion, misinterpretation, or misplaced emphasis. This matters because regulators are increasingly focused not on what firms intend to communicate, but on how consumers actually interpret information.

How It Works

Rather than scoring a document on surface metrics, Miggins simulates how different customer types engage with the material:

  • An experienced investor might understand risk terminology but miss fee implications buried in dense paragraphs
  • A first-time investor might grasp the headline message but misinterpret what "capital at risk" means in practice
  • A vulnerable customer with low financial literacy might understand individual words but fail to connect them into a coherent picture of what the product does
  • A time-poor professional scanning on a mobile device might only read headlines and bullet points, missing critical caveats in body text

Each persona produces specific, actionable feedback: what they understood, what they missed, what they misinterpreted, and why.

From Analysis to Action

The value of this approach is not academic. It shows firms where clarity fails, why it fails, and which customer types are most affected. That insight can then be used to:

Refine Communications

When testing reveals that a specific customer segment consistently misinterprets a risk disclosure, the fix is targeted. You know which sentence causes confusion, which concept needs better explanation, and which customer type needs a different approach.

Improve Governance Discussions

Board and committee discussions about consumer understanding move from abstract ("are our communications clear?") to specific ("our testing shows that 3 out of 5 persona types misunderstand our fee explanation on page 2"). This creates better decisions and clearer accountability.

Provide Evidence to Regulators

Consumer Duty requires firms to evidence that they have considered consumer understanding. Persona-based testing provides structured, repeatable evidence that communications have been assessed from the customer's perspective — not just the firm's.

Prioritise Resources

Not every communication needs the same level of attention. Persona testing highlights which documents carry the highest risk of misunderstanding, allowing firms to focus effort where it matters most.

The Regulatory Context

The FCA has been explicit that Consumer Duty is outcomes-based. For consumer understanding, this means:

  • It is not enough to write clearly — firms must show that customers understand
  • Internal review is necessary but insufficient — the customer perspective must be tested
  • Vulnerable customers require specific consideration — one-size-fits-all testing is not adequate
  • Evidence must be ongoing — understanding is not a one-time assessment

Firms that can demonstrate a systematic approach to testing interpretation, rather than just readability, are better positioned to meet these expectations.

Beyond Compliance

There is a commercial dimension to this as well. Customers who genuinely understand their products are:

  • Less likely to complain — because expectations are set accurately
  • More likely to stay — because they chose the right product in the first place
  • More likely to engage — because they feel confident in their understanding
  • Less likely to need support — because communications answered their questions upfront

Better understanding reduces cost-to-serve and improves customer lifetime value. The compliance case and the commercial case point in the same direction.

What Good Looks Like

In a regulatory environment focused on outcomes, insight into interpretation is no longer a nice-to-have. It is the foundation for confident decision-making about what is published and why.

Good practice means:

  1. Testing before publishing — not just reviewing internally, but assessing how target customers will interpret the communication
  2. Testing across segments — ensuring understanding holds for experienced and inexperienced customers, for vulnerable and non-vulnerable groups
  3. Acting on findings — revising communications where testing reveals gaps
  4. Recording evidence — documenting what was tested, what was found, and what changed
  5. Monitoring over time — reassessing as products, markets, and customer bases evolve

The firms that lead in consumer understanding will not be those with the simplest language or the shortest documents. They will be those that can demonstrate, with evidence, that their customers genuinely understand what they need to make good decisions.

See how your communications perform from the customer's perspective. Miggins uses AI-driven personas to test interpretation across diverse customer segments, giving you actionable insight and regulatory evidence. Try it now to see the difference.