Key Features Document (KFD): A Simple Guide Explaining a Financial Product

A Key Features Document (KFD) is a short, clear, and standardized document provided by financial firms to help investors understand the main characteristics, risks, and costs of a financial product before they buy it.
It is designed to make financial products — such as investments, insurance policies, or pensions — easier to compare and understand.

In simple terms, a KFD is a summary sheet that tells you what a financial product does, how it works, and what risks or charges come with it.

Core Idea

The purpose of a Key Features Document is to ensure transparency and informed decision-making.
It provides essential information in a concise and non-technical format, helping consumers decide whether a product is suitable for their needs.

KFDs are required under UK Financial Conduct Authority (FCA) rules for many retail financial products, including investment funds, life insurance policies, savings plans, and pensions.

In Simple Terms

Think of a KFD as a product brochure written in plain English.
It doesn’t sell or promote — it explains.
Before buying a financial product, the provider must give you this document so you understand exactly what you’re investing in.

Example

A Key Features Document for a mutual fund might include:

What the fund does: Tracks the FTSE 100 index.

Investment objective: Long-term capital growth.

Risk level: Medium to high.

Charges: Annual management fee of 0.75%.

Access: Withdraw anytime with no penalty.

Provider contact: ABC Investments Ltd.

This helps investors compare it easily with another fund offering similar goals but different costs or risks.

Main Sections Typically Included

Purpose of the Product – What it aims to achieve.

How It Works – Where and how the money is invested.

Risks and Rewards – Possible gains and potential losses.

Charges and Fees – All associated costs.

Tax Information – How the product may affect the investor’s taxes.

How to Apply or Cancel – Instructions and rights for consumers.

Complaints and Contact Details – How to raise concerns or request help.

Real-Life Application

The KFD is part of the pre-contract disclosure process for retail investors.
Before you buy or invest in any regulated product in the UK, the provider must give you a KFD (or, for more complex products, a Key Information Document (KID) under EU/PRIIPs regulations).

It allows consumers to:

Compare products fairly.

Understand charges, returns, and risks.

Avoid being misled by overly technical marketing material.

Common Misconceptions and Mistakes

“It’s just marketing material.” It’s a regulated disclosure document, not an advertisement.

“It’s optional.” Firms are legally required to provide it for eligible products before sale.

“It guarantees returns.” It describes potential risks and outcomes but does not promise performance.

“All KFDs are identical.” The structure is similar, but content depends on the product type.

Related Queries Investors Often Search For

What is included in a Key Features Document?

How does a KFD differ from a Key Information Document (KID)?

Is the KFD required by the FCA?

Why should investors read the KFD before investing?

What happens if a firm doesn’t provide a KFD?

Summary

A Key Features Document (KFD) is a clear and concise summary that outlines the essential details of a financial product — including its purpose, risks, charges, and terms.
It helps investors make informed decisions and compare similar products easily.
Required by regulators like the FCA, the KFD promotes transparency and protects consumers from misunderstanding or mis-selling.