Executive Summary
Communication is one of the most important skills for a financial advisor. While technical expertise is necessary to formulate a financial plan, being able to clearly communicate the findings to a client can make all the difference between whether or not the client will understand and agree to implement the advisor’s recommendations. Many advisors are accustomed to using verbal communication with clients (e.g., in client meetings) and written communication (e.g., through the delivery of a written plan), however, some concepts are difficult to explain and understand through these means. But by using visualization aids in their communication, advisors can clarify complex information and generate better conversations with clients.
According to one learning model, there are four basic categories of learning styles: visual, auditory, reading/writing, and kinesthetic. Research suggests that communication and education are both more effective when multiple learning styles are incorporated because an individual’s preferred learning style often varies day-to-day. Furthermore, presenters who use visualizations can tend to be perceived by their audience as better prepared, more professional, and more interesting than those who rely only on text-based presentations. Taken together, these findings suggest that using visualizations when presenting information to clients using other modes (verbally in meetings and through written plans) can be a good way to demonstrate expertise while building rapport with the audience.
When considering how to use visualizations, it is important to recognize that different styles of visualizations can be used to meet different communication objectives. For instance, visualizations can be categorized based on their content (conceptual or data-driven) and purpose (declarative or exploratory). By considering the nature of the content and purpose of their message, advisors can choose an appropriate style of visualization to implement. For example, data-driven, declarative ideas can be conveyed by ‘everyday data’ visualizations, such as a chart or graph objectively illustrating relationships between facts and figures (e.g., the S&P 500’s performance during the past year). Alternatively, a conceptual, exploratory idea would be better conveyed through an ‘idea generation’ visualization, such as an array of ideas that encourage brainstorming ideas. Conceptual, declarative ideas are best conveyed through visualizations that illustrate difficult concepts, and data driven, exploratory ideas can often be conveyed by combining visualizations merged together from multiple sources of information to encourage identification of new trends or themes.
Advisors can choose to create their own visualizations (such as a simple Venn diagram), but can also opt for turnkey software solutions or white-labeled products for more elaborate visualizations. Whichever option an advisor chooses, there are key design principles to keep in mind. For example, the thoughtful use of lines, colors, shading, font size, and other visual elements can help to communicate ideas and draw attention to key aspects of the visualization.
Ultimately, the key point is that visualizations can be a useful tool for improving advisor communication and client comprehension. Given the data-intensive nature of financial plans, visualizations can serve as a useful complement to written and verbal communication from the advisor and can provide clarity to clients, which can give clients more confidence in their plans and in their advisors!
When it comes to communication, financial advisors typically take one of two approaches to explain financial planning concepts to clients and prospects. They will either verbally explain their ideas or write out their points in an email or report to share with their client. Both can be useful as methods of communication, but each comes with its own specific set of issues.
For example, a client who only hears a recommendation may become overwhelmed trying to keep track of the numbers, whereas a client who only reads the recommendation may get lost in the details and fail to understand the high-level reason that the advisor is recommending the strategy. While there are many ways to overcome miscommunication, there is one particular strategy to help advisors ensure that their clients understand what they need to know: incorporating visualizations when communicating with a client during meetings.
Visualizations Are Effective Aids In Communication
Visualizations can be an important tool to help advisors communicate with their clients. Consider the old adage, “A picture is worth a thousand words”, appearing in Printer’s Ink, an advertising trade journal published in the 1920s, advocating the use of more graphics and less text for advertisements to be effective during a time when most advertisements consisted of text. To the point of this adage, visualizations have often been used throughout history to help explain complex ideas, as they offer a unique opportunity to clearly convey concepts that would otherwise be particularly difficult to explain through either spoken or written word alone.
The reason visual communication can be so effective deals with how it relates to different learning styles. According to the VARK learning model, developed by Neil Fleming to help people understand the method of learning that works most effectively for themselves, there are four basic categories of learning styles: visual, auditory, reading/writing, and kinesthetic. While Fleming argued that people had a preferred learning style, further research has suggested that more effective communication and education occur when multiple learning styles are incorporated because someone’s preferred learning style actually can vary day-to-day.
In the classroom, teachers often attempt to educate students using methods that address a variety of learning styles because people have different ways of taking in information most effectively and thus have a preference for how they learn best. A 2011 study by Iranian researcher Abbas Pourhossein Gilakjani found that the students in the study generally preferred to use visual learning styles over auditory or kinesthetic learning styles.
The key point, though, is to recognize that conveying information only in one particular style – e.g., always sending everything as a written email, or always explaining verbally – may not be a good fit at least some of the time for some clients (and potentially not a good fit all of the time for certain clients that may have a strong preference for another learning style). For which the use of the visual style – otherwise less often used by financial advisors – creates the opportunity to expand communication.
Visualization Can Support Attention, Agreement, And Retention
To examine learning styles in a business setting, a study by Swiss researchers Sebastian Kernbach and Martin Eppler was conducted in 2010 to see if visualizations did a better job communicating a proposed business strategy than text. The authors provided a business strategy to study participants using one of three formats: a text-based bullet list, a visual metaphor (which uses a graphically structured layout using a metaphor to represent new ideas using concepts from an already mastered subject area), and a temporal roadmap diagram (designed to visually highlight the chronological functions and relationships in the strategy).
Their results suggested that the visual formats (vis-à-vis the visual metaphor and temporal roadmap presentations) were “significantly better than text in terms of the achieved attention, agreement, and retention.” This further suggests that visualizations are an important element in the communication strategy.
One surprising revelation from Kernbach and Eppler’s research was that presenters using visualizations were perceived to be better (more prepared, more professional, more clear, more persuasive, more interesting, or a combination of these attributes) than presenters who used text. This suggests that advisors who incorporate more visualizations into their communication could simply be better liked by a client or prospect. And if the advisor is better liked, the client may be more likely to stay with the advisor or to act upon the advice that is provided.
The Process Of Visual Thinking
Dan Roam, the author of The Back of The Napkin, has laid out four steps of visual thinking that apply to people when actually looking at a visual:
Step 1 – Looking. The first step of visual thinking involves actually looking at the visual. For this step, individuals are collecting and screening the visual. They may be looking at the whole visual to understand what is trying to be communicated, or they may be looking for something familiar or something they recognize (and may even see elements that are confusing). In essence, an individual simply starts by getting their bearings with the visual.
Step 2 – Seeing. The second step involves a more thorough inspection of the information and involves selecting areas of the visual to focus on. Perhaps the person begins looking for patterns or observing where patterns don’t exist. At this step, elements of the visual may start to stand out for further inspection.
Step 3 – Imagining. In this step, a person begins to think critically about what they have seen. Perhaps they may be wondering about the ramifications of what they see in the visual. Or, perhaps there is a need for more information to further understand the visual. At this stage, they are thinking critically about the visual and what it may be communicating.
Step 4 – Showing. The final step in the process is being able to show the visual to someone else and help communicate it to them. This step is about making the visual more clear. Perhaps there are key points, trends, or observations to share.
In practice, when considering visual content to use with clients, advisors may go through these four steps. Perhaps they Look, See, and Imagine a client’s performance report before Showing it to them during a meeting presentation. In this case, advisors are helping the client go through the first three steps of their own process of visual thinking more easily.
The Style Of A Visualization Can Be Categorized Based On Its Content And Purpose
Not all visualizations are the same. Different styles of visualizations should be used to aid in different communications objectives. In his 2016 Harvard Business Review article, “Visualizations that Really Work”, Scott Berinato offers a framework that characterizes visualizations by asking two questions:
- Is the information in the visualization conceptual or data-driven?; and
- Is the purpose of the visualization to declare something or to explore something?
The first question addresses the content of visualizations and whether they are used to describe qualitative information (like a concept or strategy) or quantitative information (such as data, information, or statistics), whereas the second question addresses the purpose of visualizations and whether they can be organized as declarative (to make a point or a statement) or exploratory (to elicit feedback on a new trend or to brainstorm ideas).
Depending on the answers to these questions addressing both content and purpose, a visualization can fit into one of four categories, as illustrated in the graphic below.
Each of these 4 general categories identifies how the style of visualization fulfills a unique purpose of communication, as discussed below.
Idea Illustration: Conceptual – Declarative
In this case, the visual helps to communicate a known concept. If a client called concerned about a market correction and expressed a desire to sell their stocks, an advisor may begin by talking about why they should stay invested. To strengthen the argument, the advisor could follow up with an email to summarize the conversation and include a visual.
Carl Richards is a leader in this field with hundreds of simple sketches to explain complex concepts (including one that can realign a client’s focus on the important things that are within their control). In this case, the visual can send a powerful message that can be lost in written or spoken communication. In other words, the visual is used to “sell” a concept or strategy.
Idea Generation: Conceptual – Exploratory
Compared to Idea Illustration, the Idea Generation visualization is a useful aid in the brainstorming process. For example, an advisor can use idea generation visuals to uncover something new that they don’t already know and that the client may have never thought about before, such as by helping clients or prospects think about their future and priorities to identify the goals they want to address in their financial plans.
Everyday Data Visualization: Data-Driven – Declarative
When most advisors think about visualizations, they think of data-driven charts and graphs showing account valuations or net worth over time, which often consist of bar charts and graphs that report on 1 to 2 types of data (time and account values are typically the most common). These visualizations can help to set the context for more meaningful conversations and for reporting purposes. Using charts can help clients quickly and easily put key numbers in perspective relative to previous years. If a client looks at a statement and sees that their accounts are down a total of $10,000, it may evoke concern. But if there is a chart that shows that, over the last three years, their accounts have appreciated more than $250,000, it can help to put that $10,000 decline into perspective.
Below is a very simple chart of a popular investment – an S&P 500 ETF – showing the date on one axis and the price on the other axis. The data shows how the price of the ETF has changed over the last year. It’s reporting on a trend and making a declarative statement about how the ETF has performed.
Visual Discovery Of Data: Data-Driven – Exploratory
This is often the category where many different sources of data are combined into one visualization to identify new trends or themes. There may be some trial and error involved as the parameters of the visualization are changed to see if better trends or insights can be garnered.
As an example, the chart below illustrates the same stock shown in the “Everyday Data Visualization” graphic above, but now it includes several different data points. Some of the changes include the use of color, trend lines, trading volume activity, and the type of lines used (e.g., candlesticks).
In combination, these additions create a different perspective from the previous chart. While the previous chart reported on only one aspect of the data, this chart includes more data considerations to encourage the discovery of insights and trends.
Turning Ideas Into Visualizations
Understanding the benefits that visualizations can offer to improve communication efforts is the first step for advisors to take in designing an effective visual; the next step is to identify which style of visualization will work best to communicate information to clients. Luckily, there are tools and resources available to help create effective visualizations.
Generally, there are two options for advisors to consider: Creating the visualizations themselves or considering one of the many turnkey options for support. For those who decide to build their own, there are courses that can help teach how to make effective visualizations. Harvard offers a course on data visualization that focuses on helping professionals better present data and information (with no requirements for a specific software or programming experience).
Specific visualization categories can be created either by the advisor themselves or through the use of turnkey options.
Idea Illustration (Using Visualizations To Explain Complex Concepts)
Creating Visualizations Yourself: Advisors can create visualizations on their own with many different tools. Visualizations don’t need to be complicated – Carl Richards used a Sharpie marker to sketch out his concepts. Microsoft Word and many other applications offer simple tools and templates to put together visualizations such as process maps and pyramid charts.
Advisors can also use software programs to create graphics that look more professional. Canva is a popular design application that will allow you to create all sorts of graphics. And the best part is that it is very easy to use.
Advisors who can create the concept, but don’t have the desire or ability to actually design it themselves, can outsource designers to help bring their concept to life. For example, Fiverr, Upwork, and 99designs can connect advisors to a variety of different designers. Author Tina Hay developed enough visuals to help her create a book entitled Napkin Finance: Build Your Wealth in 30 Seconds or Less. You can read her story and see several examples of her work at NBCNews.com.
Turnkey Options: Advisors who prefer not to create graphics themselves have plenty of turnkey options to consider, depending on their communication objectives. The turnkey options typically provide advisors with the visual and give them the opportunity to then white-label it to their company/brand.
For instance, similar in style to Behavior Gap’s graphics, MoneyVisuals offers a sizable library of graphics to help aid in explaining difficult concepts. MoneyVisuals takes it a step further, though, by writing client-facing memos that can accompany the visual, which the advisor has the option to share with their clients.
Another example is fpPathfinder, which creates flowcharts to help explain financial planning concepts like their 2022 version of “Can I Make A Deductible IRA Contribution?”. The flowcharts can help illustrate the rules associated with certain planning strategies or help visualize the key choices a client must consider before making a decision.
Idea Generation (Brainstorming Sessions)
Creating Visualizations Yourself: Idea Generation visualizations can help advisors identify new ideas or lead better brainstorming sessions in client meetings. For example, using a whiteboard or iPad (or any other medium convenient for the advisor and client) to create mind maps can help clients capture goals and communicate their aspirations or simply help them categorize their assets.
Turnkey Options: MindMeister is an application that can help with mind mapping. Mind mapping exercises are a perfect example of how an advisor could incorporate a visual component into a meeting presentation with a new client or prospect to help identify and discuss their financial goals.
Regardless of whether advisors use a tool to facilitate brainstorming or choose to do it themselves, they may find it helpful to see how other advisors have incorporated brainstorming into their processes. For example, Sten Morgan incorporates whiteboard sessions into some of his meetings to help the client or prospect understand some of the planning options to consider.
Everyday Data Visualizations (Reporting on Trends)
Creating Visualizations Yourself: Everyday Data visualizations are the true domain of Microsoft Excel or Google Sheets. Advisors who want to create their own visuals can use these two applications for their flexibility in creating a wide variety of different charts and graphs to explain data.
Turnkey Options: Most financial planning and performance reporting software covers this kind of Everyday Data visualization. They often include the capability to create charts showing the change in a client’s net worth or performance of specific investments.
One-page financial plans can also fall into this category, as they provide a concise way to capture a lot of useful information on one page. Several one-page options help report on trends for clients, including One Page Financial Plan, Beautiful Financial Plan, and Right Capital’s Snapshot.
Clearnomics offers white-labeled chartbooks illustrating market and economic charts. Included are observations that accompany each chart to help explain important trends and to put the chart into perspective.
These graphics can be found elsewhere, but this is a powerful tool to use because the white-labeled visuals can be customized to match the advisor’s brand.
Visual Discovery (Uncovering New Insights By Looking At Visualizations)
Creating Visualizations Yourself: Once advisors have data, there are a plethora of tools available to help them create sophisticated visualizations. Harvard Business School has compiled a list of several top tools that business professionals can use, ranging from Microsoft Excel and Google Sheets (which allows the user to add live financial data like stock prices to visualizations) to sophisticated charts developed by Tableau (which has specific solutions to help the Wealth Management industry gather insights into complicated trading strategies and stock screening) and Datawrapper (which is a free website that will convert user data into a customized, polished graphic format and provide embed codes for the finished graphic).
Another format to consider is a Sankey diagram, a type of visualization that depicts processes by indicating rates or frequencies with the sizes of chart elements. An interesting example of a Sankey diagram that advisors have created illustrates the client’s income and expenses. Mike Zung of Java Wealth Planning has incorporated a version of this into a deliverable he provides to his client and was featured in the Kitces Financial Planning Value Summit of 2021.
Turnkey Options: Trying to produce clean data can sometimes be too much of an obstacle for advisors to tackle. When this is the case, there are plenty of options to consider that can help them uncover new ideas for clients.
Mike Zung has recently developed a series of templates that allow advisors to create their own one-page financial plan. One of the modules allows for the creation of a Sankey diagram that outlines cashflows. He has also turned this into a module available in Beautiful Financial Plan.
Investment-oriented options include Fund Visualizer and Morningstar Advisor Workstation, which can be used to ascertain new insights for a client-specific portfolio that would otherwise be difficult to see if looking only at the data or just seeing the numbers. The intention of these kinds of reports is to uncover new observations, trends, or insights that otherwise may be missed.
For example, Morningstar Office’s Portfolio Snapshot provides a Risk Analysis chart that quickly shows the risk/return profile for individual investments, the portfolio as a whole, and the benchmark. This can uncover observations for the advisor that they would not have seen otherwise.
Visual Capitalist offers visualizations with a broader market and economic perspective in a unique way. For example, consider its representation of the State Of The World’s Debt. Simply looking at this example invites inquiry in a way that other charts may not provide.
Investments Illustrated offers an engaging account of US and international markets in a giant chart that examines various aspects of market history.
While a chart illustrating a typical balance sheet or statement of cash flow is ubiquitous, financial planning software company Asset-Map introduces a unique perspective by utilizing a Gestalt-style visualization that presents the same kind of information in a way that is more intuitive and more digestible for the client.
In an earlier article, Derek Tharpe suggests that the one-page format of a client’s Asset-Map helps “advisors draw out patterns and formulate holistic perceptions that are relevant to the client’s broader environmental contexts.” Simply presenting the same kind of information in a unique way can result in new insights that would otherwise be lost.
One of the key objectives of Visual Discovery is to present information in new ways to encourage the identification of new trends or observations previously unrealized. While many examples listed in this section may be used initially with clients to explore Visual Discovery, these same approaches may become more useful as Everyday Data Visualization tools over time as clients become familiar with them. This is because the role of visuals that are used with clients on a regular basis (e.g., Asset-Map reports or Sankey diagrams) are generally less about visual discovery (as the visual no longer presents them with novel information that promotes new ideas) and, instead, become more about reporting on existing trends.
Design Principles Of Effective Visualizations
For the visuals that are developed to make a point (i.e., Idea Illustrations and Everyday Data Visualizations), following certain design principles will help to ensure ideas are communicated clearly. One of the most important aspects that sets a well-designed visualization apart from one that is poorly designed is how the overall context of the communication is taken into consideration. Lines, colors, shading, font size, and various other elements should be utilized to help communicate the idea and draw attention to the key aspects of the visual to aid in communication.
Scott Berinato has authored a book on this very subject entitled Good Charts: The HBR Guide to Making Smarter, More Persuasive Data Visualizations, and has also presented two excellent webinars on the topic: The Right Stuff: Chart Types and Visualization Best (and Worst) Practices and Better Charts in a Couple of Hours: Sketching to Win. These are all resources that can help advisors understand important principles about using visuals to create effective presentations.
UX Collective also offers several design-related items to consider when designing a chart. A few of the most relevant examples include:
- Use a familiar chart type. If you use a complex or unusual chart type, it may be distracting for the client.
- Add no more than 5 slices to a pie chart. It becomes too cluttered to include more than 5 slices. If that is not possible, consider a different chart type.
- Don’t use randomly generated colors. Take care to select colors that are distinct from each other. Be mindful that green is often used to represent something positive, and red often represents something negative. Which means that showing a negative number in a green font may be confusing!
- Trend lines can be distracting. Before adding a trend line to a chart, see if the story can be told without adding the trend line.
- Include a legend only when it is actually needed. In some cases, the information ordinarily found in a legend can be incorporated into the title of the chart.
Below is a summary of some of the tools and resources identified earlier:
Ultimately, the key point is that visualization plays an important role in communication. While it doesn’t necessarily replace an actual conversation with a client, it does provide a wonderful complement to a meeting or email. Not only can visualizations help to convey a concept more clearly, but, as research has suggested, they can also lead clients to perceive their advisor more favorably.
For financial advisors, the industry lends itself very well to the use of visualizations. There is an overwhelming amount of important yet complex information (from investment to tax-related data) that must be communicated to clients. Fortunately, there are lots of tools and resources available for advisors to develop great visuals, whether they prefer doing it themselves or finding turnkey solutions. And by strategically using visuals, advisors can attain their communication goals, providing clarity for their clients and helping them understand their financial plans to make the right decisions!
