You may have had a similar experience somewhere along the way.

I recently met with an industry veteran for the first time.  We talked about a wide range of things, including what topic I might explore in a presentation to a large meeting of advisors.  While driving home the next day, I was mulling over a number of investment process issues of a completely different nature.  On each front I felt stymied, with no clue as to how to proceed.

Upon arriving home, I saw an investment magazine in the day’s mail.  The cover — actually one of those advertisement paste-on covers featuring an earnest-looking CEO — instantaneously triggered an idea for the speech and some critical perspective on the investment process puzzle I was considering, even though it really didn’t have anything to do with either one.

How does that happen?  The best answer is probably, “I don’t know,”the research puzzle | When it comes to investing, that’s often the right answer, as this posting from 2011 suggests. but we do know quite a bit about creativity and what kinds of activities promote it.

A confession:  I’m an anomaly among investment professionals.  I often describe myself as “a creative person in an uncreative business” and “a generalist in an industry of specialists.”  Those characteristics differentiate my consulting approach and result in the eclectic mix from all over the investment ecosystem that you see on my websites.

The day after the “aha!” moment described above, I headed to New Orleans to attend a Council on Foundations conference as a volunteer investment committee member for a community foundation.

Innovation was a persistent theme of the conference; even in the non-profit world “changing business models” is a hot topic.  One session was led by Evelyn Huang of Stanford,Stanford | “Evelyn is a hippie stuck in a businesswoman's body.”  And a gifted presenter. who focused on the process for “design thinking.”

The interactive session got attendees away from their electronic devices, the only thing that appeared to be capable of doing so.  Huang stressed — and the exercise demonstrated — that alternating “focusing” and “flaring” stages throughout a design process is an important part of its success.  (As I wrote in “the cave and the flow,”the research puzzle | The posting is from May 2010. we have similar needs for balance in our personal information diets as well.)

It is with all this creativity on my mind that I went into the exhibition hall that is a staple of conferences of this type.  There were a number of vendors of investment services there (basically, asset managers and consultants) and I talked to as many as I could.  Generally, they were selling stability, longevity, performance, and orthodox investment theory rather than innovation, although there was a bit of cognitive dissonance, since reaching for yield/risk is very much in evidence.  (FYI, community foundations on average now have larger holdings in “alternatives” than in fixed income.)

The unfortunate fellow at the Vanguard booth had to listen to me lay down a challenge to the industry.  I had recently read about how Vanguard had helped to defeat the SEC’s money market fund reforms.  (The last edition of research puzzle pixresearch puzzle pix | This companion blog includes a chart and commentary on a wide variety of investment vehicles. shows the woes of that industry and serves as something of a preamble to this posting.)  While noting that it wasn’t his “department,” I told the Vanguard representative that the industry’s approach right now seems to be to fight everything while not trying very hard to solve the problems that exist.

That’s definitely true in the world of investment banking and seems to be the norm in most other areas of the business too.  Certainly it’s the case among the big mutual fund firms.  There are some disruptive forces about, especially the rise of low-cost ETFs, but the industry’s motto could be “to preserve and protect” — its business models and its profits, that is.

But there are huge problems to address.  And some firms will address them.  Which ones will they be?

Not those who try to “create” by back-testing.  Not those trying to match profit margins that remained unrealistically high for far too long.  Not those afraid to call a spade a spade when it comes to the shortfalls between industry promises and industry results.

At one level, it’s quite simple.  After a session at the conference on the hot topic of “impact investing,” I talked with someone who has made some of those investments at her foundation for twenty-five years.  She explained that at the beginning they had no idea what to call it, no perceived rules about how to do it, and no other organizations to benchmark against.  They just saw certain needs and filled them, creating along the way.

Take that common sense approach, add in some design thinking, get the right people around the table, keep your eye on your clients’ needs rather than your own, and disrupt this industry.  There are trillions for the taking.