The Power of Iteration

Over the past twenty years Financial Planning Software (FPS) has evolved, occasionally revealing its potential to satisfy the complex array of wants and needs of both client and advisor. Unfortunately, this potential has gone mostly unrealized as every step forward in improved advice delivery is seemingly coupled with a step backward in client engagement. Additionally, it has become standard practice to keep clients away from the process in much the same way my mom didn't want me coming into the kitchen while she was slaving over those Rice Krispie treats, that didn’t really require slaving over.

Despite the nearly ubiquitous use of technology among all demographics, the FPS experience has continued to evolve toward simplicity due to the outdated notion that our clients are not capable or simply not interested in being actively involved in the planning process. This is certainly true of some clients, but it has always surprised me how often firms allow this limiting philosophy to be applied to all of their clients. Despite good intentions, the evolution of planning software has created the false belief that what is easy cannot be sophisticated and vice versa. An audacious approach to FPS would be to make planning software even more sophisticated and powerful while simultaneously simplifying the experience for the client. This approach begins with a strong focus on iteration in all phases of the planning process.

The potential of Iteration

In my twenty years of talking about FPS, no single feature has seemed as impactful to me as plan Iteration. I’d define it as the act of making changes and observing results. Repetition of actions is implied, which is why the interface used is so incredibly important for success. Mathematicians use a term called Successive Approximation when talking about Iteration, defined as “a problem-solving method in which a succession of approximations, each building on the one preceding, is used to achieve a desired degree of accuracy.” This is what we do when building a plan. You start with low hanging fruit and go from there. If the process of iteration is made faster and easier, then so is the creation of the plan. From Plan Creation to Presentation and ultimately the Client Portal experience, iteration positively impacts the entire planning process. However, software that is sometimes strong in one of these areas is typically weak in one or more of the others, leading to countless missed opportunities to truly engage clients.

Plan Creation

When creating a plan, advisors typically know very early the types of actions that should be executed, though not necessarily the degree…at least not yet. The process ultimately requires a plan to make an estimate, see results, and then test a more aggressive or conservative version of that action. It’s true that FPS is not a crystal ball, but the power of iteration changes a guess to a much more educated one, thus much more engaging to a tech savvy audience.

Maybe an Advisor knows a client should contribute more to their 401(k)…but how much more? Should they rethink retirement age…but to what degree? The timing of social security distribution, how much they’re spending in retirement, etc.. Most actions we suggest have varying degrees, and iteration is an interface concept the traditional planning experience does not account for very well. They generally offer one of two methods: either navigating back and forth from input changes to results or using a ginormous scrolling page most advisors would not find “client-friendly.”

Presentations

Iteration is the key facilitator of discussion and provides an essential way to do more with the average plan presentation. It interactively encourages participation by easily offering what comes naturally: a way to ask questions and get answers. Providing greater ease of use and flexibility within the software could be the difference between a client who is engaged and a client who is eager to remain engaged long after the conclusion of the initial presentation.

When iteration is easy, it can be done on the fly. That means all the ways we can use financial planning software to go deeper in analysis can also be done on the fly because there is more to the Plan than just the linear funding of goals. Risk Scenarios, such as “Early Death Analysis” are a great example of where advisors could be doing more. They merit considerable discussion, but the average planning experience does not provide the sophistication and robustness of outcomes to facilitate that discussion to the degree they have the data for. These are aspects of the plan that are of paramount importance to most clients. The result is another example of a lost opportunity for advisors to do more to facilitate trust in the process.

Advisors would love to take the time to engage more deeply with their clients, but most planning technologies only provide a certain path to that conversation with little room to deviate beyond the basics. Iteration away from the linear path of the plan is authentic engagement and can be just as powerful as talking about the client’s linear plan goals.

The Take Home

It has become popular to have clients walk away from a plan presentation with access to a client portal. Unfortunately, these portals tend to be doorways into an experience that was built for advisors and not clients. Furthermore, it could be argued that the work put into the client experience is oftentimes more about controlling the presentation of results than true engagement for the client.

Advisors are not traditionally provided ways to separate Advisor Suggestions from the client sand-box unless the experience is a collection of simplistic sliders which represent broad sweeping changes. Sometimes you will see a few buttons or sliders that offer a surface-level interaction, but this does not offer real engagement or empowerment for the client. Advisors should be setting up the portal for clients to not just view results but to interact with them, which is something paper reports obviously cannot do. The ability of the client to iterate the individual impact of each decision is engaging, but the power for the client to manipulate the variables easily and possibly test them against alternative ideas is an environment setup in the best interest of the client. Giving control does not lower your value to the client, it will only raise it.

Elements of Good Iteration

Making changes and viewing results in a client portal are nothing new as Iteration has been used in FPS from the beginning. The real opportunity lies in developing an interface that is far more powerful than what is currently on the market while still being visually appealing and easy to use. The goal should be to engage the client so profoundly that they want to access the portal routinely, long after the initial presentation. Nothing does this better than good Iteration.

The strategies which allow iteration to flourish start with a clean presentation and an interface that is easy to use which is why scrolling should be minimized. Important information is in view while changes are being made. Pages that take a minute to scroll through because they contain every possible decision that could be made by man are not client friendly. They are simultaneously overwhelming and restrictive, providing a medium powerful page for advisors and an unusable page for clients. Advisors must be able to streamline what actions can be discussed, but in a way that does not limit the robustness of the analysis. A good way to streamline is to have the capability to easily separate what can be controlled by the client or advisor vs things they cannot, like life expectancy or economic recessions.

The most important element of good iteration is the robustness of modeling. We must use a combination of metrics and graphics with many points of measurement. Without that diversity, our iterations will less likely show deviations in results. The more ways we have to measure, the more pronounced the deviations will be. Anybody would be disappointed when something they consider impactful is not being represented to their expectations. The reason to iterate or even to engage is lost. Furthermore, nobody cares about small results when they believe there are big flaws in the assumptions being used. This means we must account for all potential scenarios in the design phase to avoid the need for workarounds during presentations. It is when actions are restrictive that workarounds start to pop up. By their nature, workarounds are not a straight path to the client understanding the variations in their plan because workarounds tend to work around common sense.

Conclusion

Much like the way my mom didn’t want me in the kitchen to watch her make Rice Krispy Treats, some believe it is best if the client is only presented with the final product, served up in a way that leaves them satisfied and with few questions. The general consensus among tech developers is that if the process looks laborious, similar to how Mom looked putting in all that work, then all the better. FPS continues to add more with new features and integrations, but the foundation experience itself is missing the key ingredient of good iteration. Iteration welcomes everybody into the kitchen by turning it into a collaborative experience. Clients are not merely presented a report, they’re engaged in a process. Iteration will speed up plan creation, facilitate discussion in presentation, and provide a client Portal experience that actually promotes your clients interaction. More importantly, robust iteration allows advisors to more fully show their expertise by building more sophisticated scenarios. This is the magical ingredient that will allow relationships between client and advisor to flourish in a world where human interaction is forcibly decreasing. We just have to reimagine the potential power of our software and have the confidence in our clients to share that power with them. The technology exists for us all to have our Rice Krispy treats and eat them too.