Less, but Better: How to Create “Beautiful” Financial Products

Pop Investing explores the intersection of cultural trends and investment practice in order to better understand how to serve, satisfy and engage investors.

Every year financial institutions develop thousands of new investment products, yet intuitive, functional design is not always a central concern in how these products are structured.

Dieter Rams would be disappointed. The German industrial designer is famous for his elegantly simple approach to consumer products at Braun, many of which are now on display at a newly opened exhibit in the San Francisco Museum of Modern Art. But while Rams’s functionalist school of design is still emulated for its clean, modern aesthetic (just look at your iPod), Rams wants more. "Companies or CEOs that comprehensively take design seriously can sadly still only be counted on my 10 fingers," he said in a recent Wall Street Journal article.

The investment industry – though not traditionally considered a “designer industry” – is not exempt from this critique. In fact, the originators of investment products are at times accused of going the opposite direction and making products intentionally abstruse.

To guide designers, Rams has articulated “Ten Principles of Good Design.” The financial industry could build further trust with the public (and sell more, too) by taking these principles to heart.

Here are Rams’s principles* and how they might apply to the design of financial products:

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1. Good design is innovative

Innovative design always develops in tandem with innovative technology and can never be an end in itself.

Investment industry implication: True innovations involve core rather than marginal changes. Simply making a product seem new does not create added value for the investor. Ask yourself: Does the innovation stem from a materially new concept or purely superficial characteristics?

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2. Good design makes a product useful

A product is bought to be used. Good design emphasizes the usefulness of a product whilst disregarding anything that could possibly detract from it.

Investment implication: In creating an investment product there is a temptation to make it seem more complex or “smarter” than it necessarily is. Ask yourself: Does this additional element add to the usefulness of the product or is it functionally unnecessary?

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3. Good design is aesthetic

The aesthetic quality of a product is integral to its usefulness because we use products every day. But only well-executed objects can be beautiful.

Investment implication: We are more likely to use products – and use them consistently and properly – if they are aesthetically well executed. Despite the intangible nature of investment offerings, aesthetic design is possible. It’s not that you need a pretty prospectus, but that the purpose and structure of an investment are aligned in an elegant manner. Ask yourself: Is the structure of the product in tune with the product’s purpose?

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4. Good design makes a product understandable

It clarifies the product’s structure. Better still, it can make the product intuitive.

Investment implication: Ideally, investment products should be self-explanatory both in their standalone function and their use within a portfolio. The more innovative the product, the more clearly this must be articulated in its structure. Ask yourself: Does the design of the product make its function and benefits clear?

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5. Good design is unobtrusive

Products fulfilling a purpose are like tools. Their design should therefore be both neutral and restrained, to leave room for the user’s self-expression.

Investment implication: A product’s design should not restrict its use within a portfolio. Rather, it should be structured simply enough that the consumer can find creative applications. Ask yourself: Does the design allow the product to be a compatible component within a diversified portfolio or a building block for further innovation?

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6. Good design is honest

It does not make a product more innovative, powerful or valuable than it really is. It does not attempt to manipulate the consumer with promises that cannot be kept.

Investment implication: A product’s claims must align with its expected performance. An investment that is too good to be true may attract unwary investors, but it is not good design. Ask yourself: Does the product set realistic expectations for risk and return?

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7. Good design is long-lasting

It avoids being fashionable and therefore never appears antiquated. It lasts many years – even in today’s throwaway society.

Investment implication: Investments built to capitalize on short-term trends often fail to create real value. Just because it is big news this year doesn’t necessarily mean there should be a fad product to match. Ask yourself: Will the product still be relevant years from now?

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8. Good design is thorough, down to the last detail

Nothing must be arbitrary or left to chance. Care and accuracy in the design process show respect towards the consumer.

Investment implication: Attention to detail is essential. Mishandling of technical details such as trading or tax factors drag on performance, and even minor qualitative aspects such as hard-to-understand performance reporting ultimately hurt the investor. Ask yourself: Are even the most minor aspects of the product optimized?

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9. Good design is environmentally friendly

Design makes an important contribution to the preservation of the environment. It conserves resources and minimizes physical and visual pollution throughout the lifecycle of the product.

Investment implication: Financial design might not directly impact the health of our physical environment, but it has far-reaching consequences on our economic environment. Ask yourself: Is the product detrimental to our economic or financial system?

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10. Good design is as little design as possible

Less, but better – because it concentrates on the essential aspects, and the products are not burdened with non-essentials. Back to purity, back to simplicity.

Investment implication: In the end, unlike Rams’s coffee grinders and stereos, financial products are abstract, existing only on the paper of prospectuses and in the pie charts of our portfolios. And yet they are consumer products nonetheless, and the basic tenets of good design still apply. With a bit of forethought and some help from Rams, it is possible to create “beautiful” financial solutions. Ask yourself: Is functionality at the core of the product design? Have I achieved “less, but better”?

Principle

Investment Application (Ask Yourself)

Good design is innovative Does the innovation stem from a materially new concept or purely superficial characteristics?
Good design makes a product useful Does this additional element add to the usefulness of the product or is it functionally unnecessary?
Good design is aesthetic Is the structure of the product in tune with the product’s purpose?
Good design makes a product understandable Does the design of the product make its function and benefits clear?
Good design is unobtrusive Does the design allow the product to be a compatible component within a diversified portfolio or a building block for further innovation?
Good design is honest Does the product set realistic expectations for risk and return?
Good design is long-lasting Will the product still be relevant years from now?
Good design is thorough, down to the last detail Are even the most minor aspects of the product optimized?
Good design is environmentally friendly Is the product detrimental to the entire system?
Good design is as little design as possible Is functionality at the core of the product design?

* The descriptions of the ten principles are based on text from Vitsoe.com, a company that produces many of Rams’s designs.

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