A Toolbox Approach to Investing Subverts Financial Planning

The toolbox: as lowly and elegant a solution as has ever been created. Also, one of the most dangerous sales tactics ever thought up by the brokerage industry. With the productization of investments starting in the late 80s, brokerage firms realized that they now had available to them a slew of commission-based products to sell into the market regardless of market conditions or performance.

The brokerage toolbox worked like this: the broker was given a “toolbox” full of products to address various market conditions and outlooks, and then set about to sell her clients whatever tool fit that client’s view of the markets. Mostly her tools were high fee mutual funds that paid to be included in the toolbox.


This outsourcing of investment management to third parties simply enabled the client to indulge in emotion based buying and selling that more often than not was damaging to their long-term wealth creation. The result being that several generations of investors were trained by the industry to indulge in their emotional assumptions about the markets.

If investors are to truly benefit from the markets, this “product first” approach must be replaced by a “financial planning first” approach. Your toolbox, as it were, should start with a comprehensive and targeted financial plan that takes into consideration your particular individual needs.

The plan must also be flexible enough to accommodate unforeseen circumstances, either in life or in the markets. Therefore, the second aspect of your “toolbox” should be implementation of your plan using the lowest cost investments, which are actively managed to achieve your goals.

Low cost investments provide the key advantage of allowing more of your money to stay invested. Coupled with active portfolio management that is performed in-house by a dedicated and competent team, and the results are a portfolio tailored to your particular situation.

We think that the implementation of your planning through internally managed portfolios that are integrated on one platform leads to better outcomes for investors.