Simplicity and Design Matter

This article first appeared in the August/September 2011 issue of Morningstar Advisor magazine. Get your free subscription today! 

Our industry is one in which decided complexity represents a sort of intellectual superiority. For years, the classic sales strategy relied on using confusing jargon and complex charts to convince prospects that they need us. But if you look around, people like the things that are easy to understand and use. In other industries, the pursuit of this elegant simplicity is called design. Among the most admired companies, it's not an afterthought, but a primary focus.

Apple AAPL is an obvious example. Before the iPod, nothing existed to tell you how much you'd like using a simple scroll wheel to play music. It took a designer to decide that, and soon after, few of us could imagine living without it. We can learn a lot from Apple's pursuit of simplicity and its value to our industry.

When our clients-to-be come to see us, they rarely know what they want and almost never know what they truly need. They may have a sense they need help, but they often don't even know what questions to ask. Of course, we don't help matters when we immediately dive into a 60-minute presentation full of bullet points and jargon. We end up confusing the very people we're trying to help!

Because our industry has traditionally been so bad at design, it presents a huge opportunity for members of the Secret Society of Real Financial Planners (see Questions for the Secret Society in the June/July issue) to stand out from their peers by embracing simplicity over complexity. We can do that by making the "look and feel" of everything we do a primary focus, instead of an afterthought. So, here are a few simple ideas to get you started:

Explain to your parents what you do and ask how they'd describe it to their friends.

Explain diversification to an 8-year-old and then ask the child to draw it. I've experimented with this idea, and believe me, we can't make things too simple in our industry. People don't find it offensive; they find it refreshing. 

Revisit your presentations. Do you really need 120 slides, or will 10 pictures work instead?

Reduce your proposals to a single-page summary. Some people want more detail, but I've been surprised at the sense     of relief I see when I reduce my proposals to the most important things.

The idea of embracing simplicity can be scary because it's clearly different from the way we have been doing things, but the market does reward it. Apple, Google GOOG, UPS UPS, and Volkswagen VLKAY are all examples. In our industry, Morningstar has stood out as one of the few companies that is focused on design. So, whether we're talking about an iPod or explaining how we can help people get what they really need, design matters. If we're telling people that we're trying to simplify their lives yet everything they see from us is complex, we're sending the wrong message.

Carl Richards runs BehaviorGap.com, a laboratory of sorts where he asks tough questions about financial planning and investor behavior. He puts his ideas to work in the real world through his firm, Prasada Capital Management.