The Friction is the Message

Canadian communication theorist Marshall McLuhan famously quipped “the medium is the message.”

There’s hidden meaning in choice of media. My choice to write and podcast sets a certain tone. That tone is different than Instagram or television. If you don’t believe me, ask yourself: “Would I feel the same about Jesse if everything he did was on TikTok?” I doubt it.

Last week was interesting for me and inspired me to create my own version of McLuhan’s quote: The friction is the message.

For example, I’m helping a client roll over a 403(b) account into an IRA. In 2022, I rolled my old Fidelity 401(k) into a Schwab IRA. It was so easy. Even though Fidelity were losing my assets (and the small revenue associated with them), their smart long-term tactic was to make my rollover as easy as possible.

Fidelity’s lack of friction sends a clear message:

It’s in our best interest to help all clients. We’re so good, we can afford to make your life easy even when you’re leaving us.

Good work, Fidelity.

But my client’s 403(b) rollover (from a different custodian) is ridiculously frictional. There are multiple forms with dozens of fields, involving 4 different firms, physical mail between them, “Medallion Stamps” and notarizing to make sure everything’s “official.” Whereas my rollover literally took 5 minutes, this 403(b) rollover takes weeks.

It’s a real headache and that’s with professional staff behind me to help. I can’t imagine the frustration of someone going through this alone.

And that’s when I realized: the friction is the message. This 403(b) provider is sending a clear but subtle message:

We don’t want your rollover to be successful. We want you to “give up” and leave your assets here, so we can continue profiting off you. It’s part of our business model, and important for our survival.

403(b) programs – especially for public school teachers – are notoriously predatory. When you multiply this kind of friction across thousands of attempted rollovers, I’m positive some people give up. The frictional, shoddy custodian profits off this predatory practice.

I reached out to friend-of-the-blog Tony Isola to commiserate. He wrote back:

It’s deliberate financial friction implemented by companies with predatory business models. That’s the only explanation for things like this in 2023.

– Tony

There are similar stories when it comes to 1-on-1 investment advisors and financial planners. There are different levels of friction on the way in and on the way out of an advising relationship.

Some friction is good, such as:

• “Before we decide to work together, let’s make sure our services fit your needs.”
• “Let’s set expectations beforehand, so we’re sure this working relationship will benefit both sides.”
• “Let’s get all the facts on the table first, then decide what direction to go in.”

It’s almost like dating. Slow down, get to know one another. When a couple gets married after a month of dating, we question their choice. Can they really know? A little friction (e.g. due diligence) early in a relationship is a positive sign.

But what about friction on the way out of a relationship? Not every couple works out. Are you going to make it hard and throw your ex’s stuff in the front lawn?

A few months ago, one of my clients came to me with news. Her grandson just started a career as a financial advisor, and she’d like to go support him with her business.

My first professional break up 🙂

I went to my boss to make sure I understood the upcoming logistics. He said:

A lot of advisors make this difficult on their clients. I insist we do the exact opposite. Thank her for her business with us and let her know we’ll do whatever is needed to make the transition as frictionless as possible.

I love this approach. The friction – or lack thereof – is the message. Do the right thing. Always work in your clients best interest. Take the high road.

I’m tooting my own horn, but I contrast this helpful approach against some stories I’ve heard in the industry…guilting clients into staying, ignoring emails from clients who are leaving, even accusing clients of “betrayal” for ending a business relationship. Negligence, manipulation, gaslighting. Gross.

That predatory friction at the end of a relationship sends a message: I’ve always been predatory, even if you never knew it.

And when they send you that message, believe them.

Thank you for reading! If you enjoyed this article, join 8000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.

-Jesse

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