The Problem with Conventional Thinking

Financial planning is supposed to be about crafting strategies tailored to individuals' unique goals, risk
tolerances, and financial circumstances. Yet, for decades, many advisors have defaulted to conventional
wisdom—relying heavily on mutual funds, standard asset allocation models, and one-size-fits-all
investment strategies. While these methods may provide stability, they often lack the creativity and
flexibility needed to maximize financial outcomes.

Why do so many advisors stick to the same playbook? The answer may lie not in the financial industry
itself, but in how we are trained to think from an early age. Research on divergent thinking suggests that
a significant decline in creative problem-solving begins in childhood and continues into adulthood,
affecting how professionals—including financial advisors—approach their work.

The Decline of Divergent Thinking

In their book Breakpoint and Beyond, researchers Dr. George Land and Beth Jarman conducted a
landmark study on divergent thinking—the ability to generate multiple, novel solutions to a problem.
Their study tested 1,600 children at various ages to determine how many of them exhibited "genius-
level" divergent thinking:

  • At age 5:

    98% of children displayed exceptional divergent thinking.

  • At age 10:

    This number dropped to 30%.

  • By age 15:

    Only 12% retained strong divergent thinking skills.

  • Among adults:

    A mere 2% showed signs of the creative thinking they once had as children.

The results were staggering. Over time, education and societal structures condition individuals to think
in linear, structured ways—rewarding convergent thinking (finding the "right" answer) while
discouraging creativity, risk-taking, and exploration of unconventional solutions.
This decline in creativity isn’t just an academic concern; it has profound real-world consequences. When
applied to financial planning, it helps explain why so many advisors stick to traditional investment
strategies rather than embracing more dynamic, personalized approaches.

The Financial Industry’s Creativity Deficit

The financial industry exemplifies this loss of divergent thinking. A recent survey found that:

  • 64% of financial advisors still rely on mutual funds as a core investment strategy.
  • 90% of advisors use or recommend ETFs, signaling a shift but still following conventional
    allocation models.
  • 30% of advisors plan to decrease their use of mutual funds, showing potentially some
    movement away from traditional products.
  • 92% of advisors incorporate alternative investments, but these often remain a small portion of
    client portfolios.

What’s the result of this linear thinking? Despite their popularity, mutual funds often fail to deliver
competitive returns compared to other investment options. Consider these statistics from the Dalbar
Study (2016):

  • The average yearly return of stock mutual funds is just 3.66%, compared to 10.35% for the S&P
    500 over the same period.
  • That means mutual funds, on average, underperform the S&P 500 by 6.57% per year.
  • The average yearly return on a diversified mutual fund portfolio is a mere 1.65%, barely
    outpacing inflation.
  • High fees further erode returns:

    • o 3.17% is the average fee for a non-IRA mutual fund.
    o 4.17% is the average fee for mutual funds within IRAs and 401(k) plans.

  • Perhaps most telling, 49% of mutual fund managers don’t even invest in their own funds—a
    clear signal of their lack of confidence in the very products they promote.

These statistics highlight a troubling reality: Many financial advisors continue to push mutual funds
despite clear evidence of their high fees, low returns, and chronic underperformance. This reliance on
traditional methods isn’t just a lack of financial literacy—it’s a failure of creative thinking.

The Risks of Following the Herd

Over-reliance on conventional investment vehicles can limit financial growth in several ways:

1. Higher Fees and Lower Returns

As the statistics show, mutual funds underperform
significantly compared to simple index investing or other asset classes. High fees compound this
problem, further eating into client returns.

2. Tax Inefficiencies

Many advisors fail to consider the tax implications of mutual funds, leading
to unnecessary capital gains taxes and reduced net returns.

3. Lack of Personalization

Many advisors stick to standardized investment models rather than
crafting individualized strategies that consider unique client goals and risk profiles.

4. Failure to Adapt

The financial landscape is constantly evolving, yet many advisors cling to
outdated models rather than embracing newer, more effective strategies.

Education First

This is where working with an advisor who prioritizes education over sales and who think like an
architect, not an assembly-line worker is vital—professionals who craft individualized, creative financial
plans rather than assembling prefabricated portfolios.

Conclusion

The statistics are clear: typical investment strategies underperform, their fees are high, and even the
managers selling them don’t invest in their own products. Yet, many advisors continue to recommend
them, not because they are the best option, but because they are the familiar option.
If we want better financial outcomes, we need better thinking. That starts with financial professionals
reawakening the creativity, opening up to the reality that there isn’t just one answer in the back of the
book (and don’t look, that’s cheating) —challenging conventional wisdom, exploring new possibilities,
and building financial plans that are as unique as the clients they serve.

Bibliography

1. Land, G., & Jarman, B. (1998). Breakpoint and Beyond: Mastering the Future Today.
HarperBusiness.
2. Dalbar Study (2016). Quantitative Analysis of Investor Behavior (QAIB). Dalbar Inc.
3. Visual Capitalist. (2024). Top Investments Used by Financial Advisors.
4. Money.com. (2024). Best Investment According to Financial Planners.
5. Mercer. (2024). The State of Alternative Investments in Wealth Management 2025.