Executive Summary
Customization versus Standardization - it's a challenge to find the right balance in most industries, and financial planning is no exception. In fact, the prevailing view in financial planning has been that standardization simply has no place here - when every client is unique like an individual snowflake, the whole essence of financial planning is about customizing to the individual needs and goals of the client, right!?
Yet the reality is that this viewpoint confuses standardizing the process and inputs going in, with the outcomes that come out. While standardization may have once meant that not only was the process always the same, but also the results at the end, this is no longer the case; instead, it looks more like Starbucks, where a highly standardized process also helps the company to better deliver that individualized, personalized coffee order. It's only through standardization of the process that Starbucks has simultaneously become a remarkably efficient and profitable company, capable of charging a premium for an effective customer experience for what is otherwise a commoditized product, and become the company that introduced comically long hyper-personalized coffee drink orders to our coffee culture.
In the financial planning context, this means it may be time to let go of the insistence that standardization of a financial planning process and deliverables are at odds with customized individual solutions for clients, and instead recognize that bringing better consistency to the process may actually be the thing that allows us to create more trust and make that personalized financial planning experience for clients better than ever.
The Difference Between Process Inputs And Outcomes
When weighing the costs and benefits of standardization, it's important to recognize the crucial difference between standardizing the process going in, and standardizing the outcome for the customer/client.
Although the two are often viewed interchangeably, the reality is that they're not. Certainly, some of the earliest forms of standardization were all about standardizing not just the inputs but also the outputs - thus was the rise of mass production manufacturing assembly line innovated by Henry Ford to produce the Ford Model T. The more consistent the parts were, the more consistent the outputs (the final car that was produced) could be, and the more efficient the process could/would be to create them.
But the reality is that standardization has come a long way since the origins of the assembly line. One of the virtues of a standardized process is that ultimately, it allows for multiple products, services, or outcomes to occur based on a series of standard inputs. For instance, think of a teddy bear: the basic materials used to construct a teddy bear can be standardized to the last bit, but that doesn't mean you can't end out with a wide array of bears that all look different on the outside when the process is done. The same is true for a whole host of other goods: just because the underlying parts are standardized, and the construction/creation process is standardized, doesn't mean you can't still mix and match different standardized components to produce a remarkably customized solution!
Customized Starbucks Experience From Standardized Starbucks Process
And in fact, the potential to mix a wide range of standardized parts and processes into a customized solution isn't unique to manufacturing physical products; it works for experiences, too. For instance, look at what it's like to visit a Starbucks.
While Starbucks may "just" sell coffee, the reality is that Starbucks carefully crafts the entire "Starbucks experience" from how the store is configured, to the look of the walls and the feel of the cup, to the consistent creation of the order itself. As a result of the Starbucks experience, the store can charge a premium for what, in the end, amounts to just a cup of coffee that can be obtained at a lower cost with a similar quality from a competitor, or just home- or office-brewed for a fraction of the price.
In addition to a remarkably consistent Starbucks experience no matter where you go, every step of the coffee-making production itself is highly standardized, as that allows Starbucks to improve its efficiency further. Every ingredient that the barista may use is stored where it needs to be to keep the process efficient. The machines used for everything from brewing the coffee to preparing the right amount and consistency of milky foam have been iterated upon over and over again to make them better, reducing over the years the time it takes for Starbucks to produce that cup of coffee from several minutes down to 30 seconds... which in turn allows the store to serve even more customers faster and better.
Yet notwithstanding this astonishing depth of standardization and consistency in every step of the Starbucks experience, what results is a remarkably customized, individualized product! After all, Starbucks is not only an innovator for a speedy and standardized coffee-buying experience; they're also the ones who are responsible for the longest potential coffee order ever, the "Double Ristretto Venti Half-Soy Nonfat Decaf Organic Chocolate Brownie Iced Vanilla Double-Shot Gingerbread Frappuccino Extra Hot With Foam Whipped Cream Upside Down Double Blended, One Sweet'N Low and One Nutrasweet, and Ice" or in the case of my preferred drink of choice, the not-quite-as-long "Venti Sugar-Free Vanilla Nonfat Chai." Which is prepared and ready in less than a minute, thanks to the standardized process to make my entirely personalized drink.
And notably, the standardization and consistent experience isn't just about process and efficiency, either. One of the major reasons that Starbucks is so successful, with stores dotting the globe, is that their incredibly consistent outcomes for customers builds an incredible level of trust in the company, that what the customer gets will be exact what was desired and expected, every time.
Customization Vs Standardization In Financial Planning
In the financial planning world, there's long been a great deal of pushback on standardization, built upon the belief that since every client is unique like a snowflake, it's impossible to accomplish. Yet as I've written in the past, it's really about standardizing the deliverables and the process, not the plan recommendations and outcomes; in fact, a recent white paper by Fox Financial Planning Network makes the point that developing a "Starbucks" client experience is the key to sustainability, profitability, and growth, built around the advisor CRM as a hub for not just client information and data but workflows and automation.
Perhaps even more important is that if the process that goes into planning with every client is different, there's simply no way to ensure a consistent financial planning experience, which also means there's no way to ensure it's consistently good or to reliably improve it over time. In other words, just like Starbucks, the more standardized each part of the process is, the easier it is to customize and adapt the particular solution to the client's exact wishes, wants, desires, and needs, delivered in a profitable and efficient manner for the business. Not to mention that the improved consistency can also help clients better trust in the planner, knowing that the solutions will be consistently good for both themselves and whoever they may consider referring.
So where are the opportunities for standardization in a financial planning firm? The opportunities are everywhere once you start to look, and might include:
- How exactly do you respond and what do you send when a prospective new client contacts you?
- How do you follow-up with a referral source when a referral is made?
- At what point in the new client process do you sign the planning engagement, the insurance or investment paperwork, an investment policy statement, etc.?
- Exactly what information is required for a financial planning client, which analyses are run, and what software is used for each part?
The list goes on and on. Until each step of the process is fully standardized, it's almost impossible to improve the process. The same applies for things like the financial planning deliverable, too; if you use the same software to do the same analyses in the same way and report the same results in the same format, you can figure out how to make the steps of creating the plan faster and more efficient, even if the reality is that the particular details of the plan will still be entirely customized for every client.
The bottom line is simply this: if standardization can allow for a premium-value experience for the delivery of a cup of coffee, or the creation of a teddy bear, turning an entirely commoditized product into an entirely personalized solution, why can't we figure out to do the same for financial planning, too?
