FinTech’s Index Card Moment

As FinTech matures and unbundling ramps up, new companies must continue to root out unnecessary complexity.

Recently, author Helaine Olen and academic Harold Pollack put out “The Index Card: Why Personal Finance Doesn’t Have To Be Complicated.” The intent — to make doing the right thing with your money simple, so that you’d actually do it. The premise — do these ten things and you’ll be smarter about how you spend and save your money than the vast majority of Americans.

It’s simple enough advice that it fits on one index card.

Source: New York Times. A careful reader might notice there are only nine things on this list. #10 is “Remember The Index Card.”

In much the same way as Burton Malkiel’s A Random Walk Down Wall Street, Index Card is filled with practical, boring advice that the more unscrupulous players in financial services don’t want you to know. Which is exactly the reason why it’s so valuable to you.

Take this gem:

“The ideal advice show or convention or podcast would always start with someone’s reading aloud the index card that comes with this book. That would be boring to watch or listen to week after week, even on PBS.”

And so it’s not done. CNBC’s viability is dependent on active trading. But time and again, research has shown that those who trade more often have a harder time keeping up with the market over the long term.

The Problem: Complexity

I fundamentally believe there are two kinds of complexity in financial services: the necessary complexity and the unnecessary complexity. For too long, unnecessary complexity has been allowed to persist. Jargon, acronyms, and lengthy explanations intentionally made to confuse rather than to clarify.

The point has been to create information asymmetry between advisor and client. In so doing, clients stay with an advisor even if he or she is more expensive or doesn’t follow through on commitments.

Or clients don’t feel equipped to ditch their advisor when they see a lot of trading happening in their account because they perceive the maze of financial markets to be far too complicated to navigate without them.

A Solution: Software and Design

Let’s look to software for an indication of what financial services should be. If the maturation of web design and user experience has taught us anything, it’s that complex processes that happen in the background should still be very simple for the end user. Too many in traditional financial services work actively against that mission. The best software tools (e.g. Uber, Airbnb, Slack) are the ones that perform complex, high value-add functions, but go to great lengths to make that complex process appear simple to the end user.

FinTech must continue to root out unneeded complexity. We are finally at a point where that is starting to happen. As FinTech drives unbundling that goes beyond asset allocation, payments and lending, it’s more important than ever for emerging technologies to put a simple, user-centric approach at the core of what they do.