Buying Tools For A Purpose

The purpose of a tool is to assist in the achievement of some goal. It is a tactical device. There may be special skills required to operate it effectively but not always. Unless you are a tool designer or maker, tools are for what they do; they do not exist for what they are.

Tools usually make the task at hand easier to do or even possible. The essence is what they achieve.

No one wants an electric drill. They want holes. The drill is how they get them. Financial tools are for doing things. No one wants to own life insurance or an RRSP or fire insurance. They want what they do. If people cannot see what the tool does, they may be reluctant to buy it and the overall plan will be less likely to work.

Other financial plans fail because the tools come to dominate. If you own any tool for what it is, rather than for what it does, you have made a mistake. If you do not understand why you own a particular tool, that too is a mistake.

Tax shelters, interests in movie limited partnerships, trusts, pension plans, corporate mutual funds, segregated funds, Alberta trusts, some kinds of life insurance, and hundreds more sometimes fall into one or the other of those categories. The look matters and is exciting in some way. You might be the only one who has one of these tools. Pretty cool.

It is not that these are bad tools. It is just that they don’t work the same way for everyone and some of them don’t work at all for you.

You can tell if you should have one. Focus entirely on what the tool does, not what the tool is. If you cannot see the “How I get whatever it is that I want” part, (like the drill gets holes) then probably the tool is not for you. Strategy first. Tactics next. And you prove your choice by using it.

If you are a financial adviser, you should not show a client any tactic or tool except in the context of solving a problem or exploiting an opportunity that the client knows about and values. Doing tactics/tools first means the tool has value without the context of its purpose. It is for what it is, not for what it does. That is like Armani selling designer quarter-inch drills for $800 each. They don’t, do they? You can never be sure any more. Which of the old guys ever expected to see a Cadillac pick-up?

Focus on purpose and the collection of useful tools available will become more clear. Since Home Depot does not stock financial tools, you will probably need to talk to an adviser who is familiar with what is available.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. | Twitter @DonShaughnessy | Follow by email at moneyFYI

2 Comments on “Buying Tools For A Purpose

  1. Such purity of thought is refreshing in our jaded world. It is this to which Albert Einstein was referring when he said, “Confusion of goals and perfection of means seems, in my opinion, to characterize our age.”

    This is brilliantly illustrated by your example of the quarter inch hole. In the world that you propose, all drill bits would come from the same factory, cost under $1.00, and there would be no well-paid commission sales people or wealthy hardware store owners.

    But we know the cynical truth, that most people who acknowledge the need for a quarter-inch hole, also may have other deciding motivations. These motivations translate to a wide variety of actions taken to satisfy the same single “very good need.”

    Ignoring hundreds of sub-classes, a FEW of these actionable motives could be:

    Pride–so they buy a high priced spiffy looking drill bit with titanium/molybendium/gobblygook coating
    Greed–so they buy a set of 100 drill bits because the cost per bit is so much lower
    Laziness–so they buy an overpriced drill bit from the hardware aisle of their local convenience store–or try to get someone else to poke the hole with a dull screwdriver
    Intransigence–so they borrow a drill, bit, extension cord and ladder, from anyone naiive enough to ever expect it back.
    Paranoia–so they overpay for a drill bit with a lifetime guarantee and bomb-proof titanium case…sent to them in an unmarked package.
    Insecurity–so they buy whatever the next 50 people they talk to, recommend
    Ignorance–so they delegate the whole issue to a handyman, and pay him to drill the hole
    Denial–so they maintain that a piece of duct tape will do the job.
    Obstinance–so they demand that the landlord make that quarter-inch hole for them. Why should they improve someone else’s house?
    Neurosis–so they call a real estate sales person because if the house needs a quarter-inch hole, who knows what else can go wrong. Time to sell, before the place falls down and kills somebody.

    All this brings to mind Ralph Waldo Emerson, who said, “People do not seem to realize that their opinion of the world is also a confession of character.” And having so thoroughly aired the imperfections of humanity, I will now retire, to ponder to which of these devices I should retreat, to avoid any motivation for self-improvement.

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