Advice businesses increasingly understand the importance of scale and efficiency, and they’re taking action to get it including consolidating and streamlining systems, adopting new technology and participating in mergers and acquisitions.
However, incremental gains in efficiency are often being eroded by choice.
Choice is a fundamental component of quality, personal financial advice.
The adverse impact of limited choice (a hallmark of vertical integration) was laid bare at the Hayne Royal Commission.
But too much choice can be a distraction, hinder decision-making and curb productivity, all for no material client benefit.
Ironically, clients aren’t the ones crying out for more choice. Many are stressed and time-poor. They want their adviser to solve their problems and remove complexity. From the array of strategies and solutions available, they want them to narrow it down and make their decision easier.
Beyond a certain point, the appeal and benefit of choice diminishes, according to the American psychologist Barry Schwartz.
In his book The Paradox of Choice, Schwartz argues that eliminating options greatly reduces anxiety for consumers. He claims the dramatic explosion in choice – giving consumers more options than any other group in history – has only created problems.
Further research by academics Sarah Whitley, Remi Trudel and Didem Kurt has also found that choice is more important when buying for pleasure because people believe their choices reflect their unique style, personality and preferences.
For utilitarian or functional purposes, choice is less important to consumers. Ultimately, genuine choice is not about a number.