“What is the difference between ERISA 3(38) and 3(21)?” Done Trone asked at the outset of his session at GRP Advisor Alliance’s annual summit Friday afternoon. “The cool people know it is 17.”
While the joke elicited groans and laughter, the rest of his comment were far more serious, as the CEO of “stewardship, governance and leadership” firm 3ethos took the Department of Labor to task for its fiduciary rule.
While a longtime proponent of an industrywide fiduciary standard, Trone argued this is not it, and will severely cripple advisors, as well as the participants they serve, while purporting to help.
“There are three points with which I’d like to begin,” Trone said. “No. 1, raise the bar. Fifteen years ago we got the big, blue book of industry standards and practices, but nothing since. Those standards are one-dimensional; they advocate for the use of an IPS, for instance, but not whether the IPS is good or bad, effective or ineffective. Through behavioral governance leadership as an industry, we raise the bar and make it three-dimensional.”
No.2, because of the DOL rule and it’s lowering of standards, now everyone is a “fiduciary,” including the “yahoo down the street, he said, before warning attendees to not “paint themselves into a corner by trying to argue that you are more of a fiduciary than that guy.”
And No. 3, behavioral governance is the foundation for advisors “to be a point of positive inspiration, as opposed to DOL’s negative fiduciary tribalism.”
“Does the DOL rule deal with governance and decision-making?” he rhetorically asked. No, all the best practices we’ve developed over the past 30 years are not in there.”
What about stewardship? No as well, as the DOL “now feels compelled to put into law that you must do what is in the best interest of your client. I’m sure that without the law, none of you would do what is in the best interest of your clients,” he added sarcastically.
Noting that the DOL advocates for the rule because the industry must build public trust, Trone argued that individuals cannot make a positive impact on the world through negative motivation.
He concluded by pointing to the structure of his presentation, and noted that most everything was in “points of three.” The reason he said was that:
- Neuroscience dictates it is how our brain works
- We still have a “caveman’s brain” that is structured in this way
- If you want to make sure clients remember what you say, use points of three.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
