How’s this for a compliance crock? See what marketing expert and author David Weinberger and ERISA expert Jason Roberts has to say.
An advisor in upstate New York organized a charity golf tournament some years ago sponsored by his firm. He naturally wanted the name of his firm and broker-dealer printed on the balls. His compliance department said yes, with the proper disclosure; which meant microscopic type would completely cover the ball and have his name and the name of the broker-dealer lost in the font. The answer to his protestations was that if a person came across a ball in a pond or woods, whether days or years later, it would nonetheless constitute an offer to sell. If only it were an isolated incident…
We’re losing our sense of the common, and this includes with the 401(k) fiduciary rule discussed ad nauseam. The reason relates to self-delusion, specifically outlined in a concept explained by marketing expert and author David Weinberger; accountability has become “accountabalism.” Although one of Harvard Business Review’s “Breakthrough Ideas for 2007,” nothing has changed in the years since.
“Accountability has gone horribly wrong,” according to Weinberger. “It has become ‘accountabalism,’ the practice of eating sacrificial victims in an attempt to magically ward off evil.”
While he’s thankfully writing in the metaphorical, accountabalism rests on four interrelated beliefs and practices:
- One more form, policy, rule or even law is all that is needed to solve a complex problem.
- Accountabalism assumes that if something bad happens, it’s a sign the entire system is broken and in need of radical change.
- It’s blind to human nature. As Weinberger rightly notes, “When such disincentives as the threat of having to wear an orange jumpsuit for eight to ten years didn’t stop the Enron nightmare and other bad things from happening,” what makes us think more forms and policies will?
- While claiming to increase individual responsibility, it actually drives out human judgment through more bureaucracy.
Remember, it wasn’t regulation that exposed Madoff; indeed, it can be argued the SEC acted as enabler.
ERISA expert Jason Roberts warns against the overconfidence of advisors who have always acted in a fiduciary manner, and therefore discount the DOL’s rule, as there is a lot over which they can inadvertently trip. And that’s really the rub. Far from forcing disingenuous and even criminally-inclined advisors to act in an ethical manner, it potentially penalizes otherwise ethical advisors for paperwork and policy mistakes.
American Retirement Association CEO Brian Graff argues the winner in all of this isn’t the 401(k) advisors, regulators, product manufacturers or even clients, but lawyers like Roberts. We agree.