Using Tools

Who are the smartest 25 people on earth?  No one really knows but Princeton physicist Freeman Dyson would likely be in the conversation and it would not be solely for his work in physics.  He has sound ideas in other areas as well.  Math, religion, and science in general, prove both his insight and his humility.

I like science but I am not obsessed with it, so I do not always see enough of the thinking of scientists.  This Dyson idea found me and I am grateful for it.

“There is a great satisfaction in building good tools for other people to use.”

While few can claim to be wonderful tool builders, I think there is another dimension that anyone with experience can aspire towards.  They can help people select the tools that are appropriate for the task.  That is ideally what advisors do.

Any complex undertaking is supported by tools.  Tools make complicated tasks easier.  A lever adds strength.  A hammer focuses.  They can speed things up, slow things down or keep track of important information.

Tools matter.

Financial planning can be a daunting task.  It matters so I suppose it should be.  Few  have any deep experience with it, and parts of it are complicated, fussy and ever-changing.

There is a simpler flaw that hinders.  People see the tools before they know their task.  That can hardly end better than a three year old in a jewelry store with a hammer.

I deal in life and disability insurance so let’s use them for examples.  Does everyone need life insurance?  Certainly not.  Life insurance has value in several areas of life but if those do not apply to you, what would be the point?  Life insurance and disability insurance replace the wealth that would have been created had the person continued their career.  Life insurance may also protect values that exist.  No need to sell the business to pay taxes or equalize the estate.  Life insurance provides a liquid asset. No need to sell illiquid assets for too little.  When you need money, you sell what you can not what you want.

Financial tools are only useful as the answer to a question.  Do not buy the tool until you understand what it does and what tool options you have.

I own an electric drill because I want holes once in a while.  Without that desire, I would be foolish to own a drill.  If I were a craftsman who builds fine furniture, my choice of drill would be quite different.  Precision, ease of use, durability and ergonomics would all matter.  The tool would be a drill, but a very different one from my Black & Decker 1/4″ model.  The craftsman cannot afford a cheap tool.

Know what you want it to do and when, then select the tool that is specific to your needs.  A craftsman-quality drill has a higher price, yet it has lower cost.  So with insurance.

It is about cost versus value.  When you understand the problem before you buy the tool, the price is less important.

Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.


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