Ask most people if they'd prefer more choice or less - almost always they'll answer "more choice". After all, how could anyone argue with having more options available to us?And it's true that having more choice is in fact better than less choice- except when it's not.

In his book "The Paradox of Choice - Why More is Less", American academic Barry Schwartz makes the case that as the abundance of choice has spiraled upwards, even mundane decisions have become increasingly complex. Choice overload has resulted in increased stress and anxiety and in some cases paralysis - he recommends limiting choices to a manageable number and having the discipline to focus on important decisions while ignoring the rest.

Here's one example of the impact of too much choice. In the retirement accounts that companies in the U.S. offer their employees, research shows that for every additional 10 mutual fund alternatives offered, participation drops by 2% -- even when companies are matching contributions and people are leaving money on the table.

Along the same lines, an article in the New York Times describes research with students at MIT, in which they displayed an irrational attachment to keeping options open for the sake of keeping options open, even when it was costing them money to do so. (You'll find a link to this article at the bottom of this post).

Almost all of us, advisors and clients alike lead overly complex lives -- we all have too many things to do, too many places to be, too many people to talk to, too many emails to respond to, too much to read.

As a result, one way that advisors can bring value to clients is by looking for ways to simplify their lives.

If you're preparing a 10-page or 20-page financial plan or a 5-page Investment Policy Statement, for example, ensure you have a short page summary at the front.

When meeting with clients, start with a simple point form agenda to outline what you'll be discussing - and follow up with a one-page note summarizing next steps. And in reviewing their portfolio, ensure that you start with a short executive summary.

When presenting recommendations, tell clients that you have reviewed a wide range of options - but are presenting the one or two alternatives that best fit their needs rather than four or five.

And once you've agreed on how much clients need to invest, consider a monthly investment plan where contributions are automatically deducted from the client's account. These monthly plans are sometimes associated with smaller clients --but can make just as much sense for larger clients. Investing over 12 months rather than in one lump sum has a couple of advantages. First, it eliminates the risks of getting the timing in a given year exactly wrong by coming in at the peak. Second, by having an automatic investment plan in place, you're more likely to see clients actually follow through on investing in the kinds of choppy markets we've seen of late - the more choices clients have to make, the more chances they'll get cold feet and the greater the likelihood their resolve will falter.

Advisors can play many critical roles in their clients lives. They can help investors clarify their long-term goals and put a plan in place to achieve those goals, assist them in gaining control of their financial futures, help them make the appropriate tradeoffs and allow clients to sleep soundly at night.

Another important role is helping clients to reduce complexity when it comes to their financial decision making - and lowering their stress and anxiety in the process. Focus on simplifying your clients' lives and you may be astonished with the results which follow.
SCIENCE | February 26, 2008
Findings: The Advantages of Closing a Few Doors
By JOHN TIERNEY
We can always tell ourselves that it's good to keep options open, but is it really?