Readability: What is it, and should you be measuring it?

When it comes to financial documents, clarity is crucial. Investors need to understand the information presented to them, yet many reports, brochures, and key investment documents are still packed with dense language and technical jargon. This is where readability scores come in—they help measure how easy it is for someone to read and comprehend a piece of text. But how do they work, and why should financial firms be paying attention?

What is readability?

Readability refers to how easy or difficult a piece of text is to read and understand. Various factors influence readability, including sentence length, word complexity, and overall structure. Readability scores use formulas to quantify these elements, providing an objective measure of how accessible your content is.

Key readability metrics explained…

There are several readability formulas that financial firms can use to assess the clarity of their documents. Each formula has a slightly different approach:

• Flesch-Kincaid Grade Level – Provides a U.S. school grade level that indicates the years of education needed to understand the text. The lower the grade, the easier the text is to read.

• Gunning-Fog Level – Estimates the number of years of formal education required to comprehend a document. A score of 12, for example, suggests that a reader needs a 12th-grade (final-year school) education.

• Automated Readability Index (ARI) – Uses a formula based on character count per word and words per sentence to determine readability. Like Flesch-Kincaid, it returns a grade-level score.

• Flesch Reading Ease Score – Ranges from 0 to 100, with higher scores indicating easier readability. A score of 60-70 is considered easily understood by 13- to 15-year-olds.

• FORECAST Score – Designed for technical writing, this measure predicts readability based on the number of polysyllabic words in a sample.

• Lexile Score – Widely used in education, this score measures both text difficulty and reader ability. A higher Lexile measure indicates more complex text.

• LIX Score (Läsbarhetsindex, or Readability Index) – Popular in Europe, this metric focuses on sentence length and the percentage of long words. A higher LIX score means more difficult text.

• SMOG Score – Stands for "Simple Measure of Gobbledygook." It estimates the years of education needed to understand a text, focusing on polysyllabic words.

• Coleman-Liau Score – Unlike others, this score relies on character count per word instead of syllables, making it useful for automated readability assessments.

• Dale-Chall Score – Measures readability based on a list of 3,000 common words. Texts that use simpler, more familiar words receive lower (easier) scores.

Why readability matters for investment literature

1. It enhances investor understanding
   If investors struggle to grasp key details about an investment product, they may disengage or misunderstand risks. Readability tools help ensure documents are clear and digestible.

2. It helps you meet regulatory expectations
   Financial regulators, including the FCA, emphasise the importance of clear communication. Readability testing can support compliance efforts by demonstrating that documents are written with investors in mind.

3. It helps you build trust and engagement with investors
   A document that is easy to read signals transparency and professionalism. When investors can quickly understand information, they’re more likely to engage with it—and with your firm.

Should your firm be measuring readability?

In short: yes. Readability scores provide an objective way to assess document clarity, helping firms refine their communication and improve investor comprehension. By prioritising readability, you can remove barriers to understanding, strengthen client relationships, and enhance the overall investor experience.

However, readability scores are just one element of measuring comprehension. Plain English principles and clear and accessible design are also important to apply, to maximise investor understanding. So while readability measures shouldn’t replace expert judgment, and certainly shouldn’t be used as your only measure of comprehension, they are an incredibly valuable tool in creating accessible, compliant, and effective financial literature.