I hope you get value out of this blog post.
For this next piece in my series on applying UX laws to your financial advisory practice, I’ll be looking at Hick’s law and talking about why it’s so important to keep both your client services and your office workflow as simplified and straightforward.
As financial advisors, you’re often dealing with some incredibly complex calculations and strategizing to maximize returns, minimize tax impact, and ensure clients achieve their financial goals. Because you’re so familiar with it, though, you might forget to simplify it for clients or team members who aren’t as knowledgeable. In this article, we’ll look at why that complexity can end up causing problems and how you can apply Hick’s law to help both your team and your clients make more confident and accurate decisions.
Hick’s Law states that, “the time it takes to make a decision increases with the number and complexity of choices.” In other words, the more options you have, the longer you’ll take to pick one.
If you’ve ever been in a grocery store, faced with choosing a pack of paper towels when there are dozens of brands making competing claims about whose paper towels are the best, you probably understand what Hick’s law is getting at.
Beyond choosing between options, it can also make completing a task difficult. The more complicated a task is, the longer it will take someone to figure out what step to take first and how to get it done.
To avoid this problem, Hick’s Law suggests that minimizing choices as much as possible and breaking complex tasks down into simpler steps will help people make decisions faster. Think about the grocery store example again: if there were only two brands of paper towels to choose from, you’d be in and out in minutes.
In the office, Hick’s Law will mostly apply to the workflow. The more complex a process is, the more difficult it will be to complete, even if your team is highly skilled. If every decision a team member makes needs your approval or clarification, for example, this can quickly create a bottleneck.
However, if you empower your team to use their own experience and knowledge to make certain decisions, the work can keep going and you just need to monitor and make corrections as needed.
When a client’s money is on the line, this might seem like a risky proposition but there are plenty of areas of your practice where giving your team more authority to make decisions won’t directly impact a client’s account.
If your assistant has your calendar and knows what your availability is, for example, they can schedule meetings for you without checking in with you first. Likewise, if you implement clear guidelines, other administrative and routine tasks can be handled by your team on their own.
If guidelines state that follow up emails should be sent out before the end of the day that the meeting was on, your team will know which follow up emails to prioritize and when to send them out. If guidelines state that annual summaries are sent out to clients at the same time each year, your team will know when to start putting those summaries together without you needing to instruct them.
Simplifying the workflow and empowering your team to make decisions on their own frees up more of your time to focus on strengthening client relationships and doing the work that you can’t delegate to team.
Hick’s Law has tremendous implications when it comes to both prospective and current clients. Let’s start with the prospects. If you put a menu of your services in front of them that details dozens of different service options they can choose from, it will be harder for them to figure out what it is they need.
Instead, try organizing those into three levels of services: transactional services, planning, and annual planning. Under each section, include a very simple description of what each level involves. Then, as they start asking questions, you can clarify the points that are most relevant to them and provide details where they need them. Of course, if you take this approach, you need to provide more disclosures but those can be made available either while they’re asking questions or when they sign.
While you can provide a comprehensive picture of every possible service you can provide today or in the future, you need to provide a personalized picture of how your services can help that prospect achieve their particular goals.
For current clients, Hick’s Law will mostly apply to review meetings and to providing your recommendations. Let’s take a look at two examples of a follow-up email to a client regarding a recommendation:
After reviewing several options, I recommend you consider investing $250 a month in ABC 529 Plan for your son, Tom.
After reviewing several 529 plans, I recommend you consider investing in ABC 529 Plan for your son, Tom. Based on our research, the age-based portfolios in this plan have the potential to be a better fit with your son’s time horizon. Consider investing $250 a month towards his education. You wanted him to join an Ivy League school and with your current savings plus this additional ongoing investment, you will be able to achieve this goal.
Email A is simple and straightforward. In a single sentence, it tells the client what 529 plan you recommend and how much you recommend investing. Email B contains that same key information but buried in a lot of extra details. Just seeing how much text there is can make a client feel like it’s more complex than it is and delay or avoid making a decision.
While those extra details are important, they aren’t necessarily important to include in your emails and communication with your client. They can instead be added to the plan itself so that your client can access the details as needed rather than being inundated with them in the email.
If you do need to include more details in your email, use bullet points and other formatting to make sure it still looks readable. Here’s an example:
Each bullet point includes one piece of information. The most important parts are bolded to help the client quickly find the key information. With this format, you can include the details you need but present it in a simplified format that’s easier to digest.
Cutting complexity like this makes it easier to process the information and come to a decision. Prospects will have a more confident grasp of what they can expect from you and clients will have a more confident grasp of what you’re recommending and why.