In 2018, were fiduciaries better at planning or implementing?
Did fiduciaries demonstrate a greater capacity for character and accountability (driving procedural justice and moral and ethical decision-making), or situational awareness and adaptability (driving social astuteness)?
To begin to ask such questions, 3ethos released the industry’s first psychometric-based instrument this past year to assess behavioral governance—the study of the interrelationships between leadership, stewardship and governance (fiduciary).
Behavioral governance is based on the groundbreaking academic research in neuro-leadership that has identified key neurological and psychological capacities that impact the quality of an effective and inspiring decision-making process (see “Are Great 401k Advisors Born or Made?”).
In 2018, 3ethos conducted a study using the self-assessment version of the behavioral governance instrument with 237 fiduciaries.
The instrument measures five leadership behaviors, five stewardship behaviors, and five governance steps.
The instrument captures a person’s level of skill, and the amount of effort they employ, associated with each behavior and decision-making dimension.
A proprietary algorithm then calculates how impactful the individual is for each behavior and governance step.
The study results:
Highest scores for leadership and stewardship—scores can range from 0 (low) to 35 (high):
| Behaviors | Scores
(Skill x Effort) |
| 1. Character-full | 23.7 |
| 2. Authentic | 21.9 |
| 3. Accountable | 21.6 |
| 4. Compassionate | 19.9 |
| 5. Competent | 19.8 |
Lowest scores for leadership and stewardship—scores can range from 0 (low) to 35 (high):
| Behaviors | Scores
(Skill x Effort) |
| 6. Adaptive | 18.1 |
| 7. Attentive | 17.5 |
| 8. Courageous | 17.4 |
| 9. Aligned | 17.2 |
| 10. Collaborative | 16.7 |
Governance steps ranked high-to-low – scores can range from 0 (low) to 35 (high):
| Governance | Scores
(Skill x Effort) |
| Step 4: Implement | 17.3 |
| Step 5: Monitor | 15.9 |
| Step 1: Analyze | 15.8 |
| Step 3: Formalize | 15.3 |
| Step 2: Strategize | 15.1 |
Initial interpretation of the study results:
- Fiduciaries are demonstrating a greater capacity for procedural justice in their dealings (Character-full, Authentic, Accountable, and Compassionate), than for social astuteness and situational awareness (Adaptive, Attentive, Aligned) and working with others (Collaborative).
- A corollary to the first point, the lower scores associated with social astuteness and situational awareness is reflected in the governance steps that have the lowest scores–Analyze, Formalize, and Strategize. Central to these three steps is goal-setting and the development of a strategy that has the greatest probability of meeting a client’s stated objectives. If the level of skill and effort associated with social astuteness and situational awareness and collaborating with others is not optimal at these steps, then one has to question the quality of decisions associated with implementation and monitoring.
Based on these results, retirement advisors should be mindful of the following in 2019:
- Head the phrase “inquiry before advocacy.” Pay more attention to what trustees and investment committees have to say—pay even more attention when they have nothing to say. As a rule of thumb – 70/30. If you’re doing your job right, the client should be doing 70 percent of the talking.
- Be more collaborative and attentive to your clients and committees to ensure you are aligned, placing greater attention on developing and formalizing a strategy. Your primary responsibility as a fiduciary is to manage the details of a procedurally prudent process. Be more adaptive and courageous in exploring options—there’s a tendency today for advisors to come to the table with a predetermined solution. They then gloss over the planning phase of the process to get right into implementation.
Lastly, rekindle the love you have for your clients, for the people you work with, and for the awesome responsibility and honor you have to serve as a fiduciary.
In the words of the Righteous Brothers, there is evidence that you may be losin’ that lovin’ feelin’.
Don Trone, L5, and Dr. Sean Hannah are co-founders of 3ethos, along with Mary Lou Wattman, L5, Rear Admiral Steve Branhamand Dr. John Sumanth.
Don Trone is regarded as the ‘Father of Fiduciary’. He is the CEO and co-founder of 3ethos and the CEO and one of the co-founders of the Center for Board Certified Fiduciaries which is affiliated with the Wake Forest University School of Professional Studies. CBCF is the only organization offering graduate-level training in the leadership and stewardship roles of fiduciaries.