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The KISS Rule: Prove Your Genius through Simplicity

By Mark DiGiovanni, CFP

“Simplicity is the ultimate sophistication.” – Leonardo da Vinci

During the 1970’s, Japanese motorcycle manufacturers came to dominate the market with increasingly sophisticated, potent, yet reliable machines.  It reached its apex near the end of that decade, when Kawasaki introduced a six-cylinder behemoth, the KZ1300, which one-upped everything in size and complexity.  The motorcycle was well-received, but one motorcycle tester ended his review with this question: “Do you really need an extra hundred pounds of engine just to move an extra hundred pounds of engine?”  Even though it has been more than three decades since I read that reviewer’s comments, that question has stuck with me because it prompts me to think about the difference between the necessary and the merely superfluous in whatever I do, especially when serving my clients.

Recently a client of mine, who was being courted by another financial advisor, brought me a prospectus he had been given for a new derivative product that had been concocted by one of the big Wall Street firms that will remain nameless.  The hook was that this product would pay an interest rate of 10% per year for years 1-5; that hook was prominently stated on the front page of the prospectus.  The next paragraph was one extremely long run-on sentence about how the interest rate was to be calculated for years 6-10.  I’m no genius, but I know my way around a prospectus, and I could not comprehend their calculation methods for years 6-10.  I can’t imagine how the average prospect for this product could be expected to comprehend it, either.  I should also mention that the prospectus was 73 total pages long, the pages were full size, and all were covered in small type.  I’m comfortable in assuming that most of those 73 pages were dedicated to taking away what was offered in years 1-5.

Is Simplicity Better?

Why do we choose to make things complicated when simplicity will work just as well, if not better? I believe the reason goes back to a basic insecurity in our profession.  We think that if we make things simple for our clients, our clients will come to believe they no longer need us.  In order to secure our position with clients, we make many aspects of finance so complicated that our clients will come to feel helpless without us, thereby securing their reliance upon us.  Not only is that a bad way to treat clients, it is inefficient to the point of being counter-productive.

What people seek from us, more than anything else, is clarity.  They want to know what to do, and they want to know how to do what they need to do in a way that is both understandable and achievable.  Many financial advisors devise complex financial plans, professionally prepared and nicely bound.  Those plans are a financial plan variant of that 73-page prospectus.  At least nine times out of ten, such a financial plan will end up in the client’s desk drawer, unread and unimplemented.  When I meet with a potential client, I use a legal pad and pen to lay out their financial plan.  I list no more than five action steps to start.  They typically include simple steps like getting wills prepared and maxing out contributions to tax-advantaged retirement accounts.  I tell the potential client that these steps must be done first before we proceed to anything more complicated.  Nine times out of ten, if the client is at all serious about improving their financial lot, those first action steps get done and rather quickly, too.

To get a proper perspective on how your clients view financial complexity, whether in products or plans, think about your own past experiences.  Somewhere in your education you probably took a complicated and difficult subject – for some it was accounting; for others it was calculus; for some like me it was those and others.  If the teacher made the subject matter even more opaque, in part to prove that he/she was smarter than you were, it is likely that you were made to feel worse, but your opinion of that teacher was not raised.  On the other hand, if the teacher took a complex subject, broke it down to its essential elements, showed how the pieces all fit together, used tools like analogies to gain perspective, and finally showed how the subject matter affected you in your everyday life, you raved about that teacher to everyone and proclaimed that person to be a genius for taking something so complicated and making it so simple.  Wouldn’t you want your clients to feel the same way about you and to rave about you to others?

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