I hope you get value out of this blog post.
UX design advice and communication advice for financial advisors have one thing in common: both tend to emphasize simplicity. Simplified web pages and simplified explanations of complex financial topics are both extremely helpful to users and clients, to be sure. But there is such a thing as too much simplification.
That’s where Tesler’s law comes in. This UX design principle is all about making sure that you don’t oversimplify to the point of abstraction—and it’s just as relevant for financial advisors as it is for web designers.
Tesler’s law, or the law of conservation of complexity, says that for any system, there’s some amount of complexity that just cannot be reduced. In other words, there is such a thing as too much simplification. In web design, if you simplify the layout too much, it can actually become more difficult to navigate because there’s not enough detail to show where things are.
While you don’t want a busy or messy webpage, you also don’t want one that’s so barebones and empty that no user can figure out what’s what.
As a financial advisor, you also need to steer clear of oversimplification for similar reasons. When explaining financial concepts, you want to use clear, easy-to-follow language but you don’t want to dumb it down.
In financial planning, oversimplification can end up hurting returns since the simplest approach isn’t always the best. For example, investing the same amount of money into a portfolio each month without ever rebalancing it sounds easy to a client but without that rebalancing, they could be losing money in the long run.
That’s part of why clients come to you, so you can do the complicated parts of wealth management while they, ideally, just have to sit back and watch their money grow.
But to get to that point, they need to trust you and, to some degree, understand what you’re doing and what you’re recommending. That means you need to be able to communicate the complex financial plans and tools you’re recommending in a way that’s both simple enough to understand but not so simple as to be generic or missing details.
For example, explaining the difference between a Roth IRA and a Traditional IRA simply as one is taxed now and the other is taxed later is true but it’s missing some important details. For one, there are other restrictions and requirements to consider.
For two, there are different advantages that come with when those tax breaks kick in. A higher-income client or one whose income is just on the cusp of a tax bracket, for example, might benefit more in the long run from the immediate tax break of a traditional IRA where a more modest earner might benefit more from tax breaks in the future when they start making withdrawals.
Again, you know this. But that’s exactly why the oversimplification of the explanation can end up backfiring. A client might end up choosing a Traditional IRA even though they’d benefit more from the Roth, simply because “tax breaks now” sound better.
Here are some tips for finding that balance where you simplify your financial advice without oversimplifying it.
Complex details don’t have to be completely mystifying. After all, your clients are adults with at least a basic knowledge of math and how money works. Sometimes, what makes a certain financial concept so confusing is simply the fact that’s being described using technical jargon.
Take the advice you’re planning to give a client and try to phrase it using only language that you would have known in high school before you’d taken any advanced courses in finance. If you keep the language simple enough, you may not have to worry too much about simplifying the concept itself.
Visual aids can go a long way toward keeping a client on the same page, even when you start to get into the weeds of the details that are too important to simplify away. A chart showing different investment accounts side by side with the key points listed beneath each one gives your client a frame of reference to go back to while you’re busy explaining the significance of a particular point on that list.
Visuals also help clients keep that information organized by having a reference they can use to connect your current point back to an earlier point you made. It’s also a helpful reminder that they can refer to as needed later on—especially if you send over a copy in a follow-up email after the meeting.
You’re making this recommendation for a reason. Which of the client’s goals does this advice serve? Which of the client’s concerns does it address? Start from that goal or concern, explaining how this advice moves them closer to their goal.
Then, once they know how it’s relevant to them and what need it’s serving, work backward to explain how the product or strategy works—in plain, jargon-free language.
For certain scenarios—like choosing a retirement account or college savings plan—you can skip the explanations of the different options and instead lead the conversation by asking questions about what the client wants.
For example, instead of explaining the differences between a 529, a custodial account, and an educational savings account, you can ask the client questions about how much flexibility they want in terms of how the money is used, whether they might want to contribute more than the limits set by some plans, and whether they expect their income to exceed the income limits of some plans at any point while making contributions.
These questions not only help you zoom in on the right plan but have the added benefit of showing the client what kind of differences and considerations exist across each option.