The quest to understand how we can be better leaders, stewards, and decision-makers for our clan and tribe is as old as the written and spoken language.
Indeed, as fiduciaries, we recognize that to act in the best interests of our clients we cannot manage their investment decisions in isolation or in a vacuum. All factors that may have a bearing should be identified, analyzed, and integrated into their investment process, particularly a determination of the client’s core values, priorities, and sense of purpose.
There are several different ethical frameworks we can draw upon to ensure that we fulfill this critical fiduciary duty.
Of the three models, the most current and least politically divisive is Purpose-driven Leadership which consists of three interrelated elements: Psychological Safety; Moral Agency; and Moral Potency.
- Psychological safety refers to a belief that a person should be able to express themselves without fear of negative consequences. As a fiduciary, creating an environment of psychological safety is critical to building trust and engaging with a client. It’s creating an environment where the fiduciary and client alike can feel safe to share ideas, ask questions, and admit mistakes.
- Moral agency refers to a fiduciary’s capacity for making ethical decisions and a willingness to take responsibility for their actions. It involves the ability to reflect on one’s choices, consider the impact of those choices on others, and act in accordance with one’s ethical beliefs.
- Moral potency refers to a fiduciary’s courage and confidence to align an investment strategy with the client’s core values. It requires the fiduciary to demonstrate a sense of responsibility to act ethically.
For a fiduciary to successfully operate with high performance standards on a sustainable basis, they must have the character and courage to serve as a purpose-driven leader. Such a leadership style is not about the blind acceptance of a client’s goals and objectives just to keep the client content.
The purpose-driven leader is characterized by their capacity to build, maintain, and repair trust. They are compassionate, empathetic, accountable, authentic, and an active listener. They foster a culture of open dialogue, are adaptable, and have a deep understanding of how moral concepts are fundamental in developing deep personal relationships.
In the absence of purpose-driven leadership, a client will often disengage and not provide the fiduciary with the necessary feedback needed to ensure an optimal client experience which can lead to a termination of the relationship.
In summary, fiduciaries have a duty to create an environment where clients can feel safe expressing their sense of purpose, their priorities, and the investment strategy that makes them feel most secure. It’s much more than having a client sign off on a complex disclosure and onboarding questionnaire.
Sources: Hugh Massie, Executive Chairman and Founder of DNA Behavior; Dr. Sean Hannah, Professor of Management and Tylee Wilson Chair, School of Business, Wake Forest University; and George Gay, CEO of First Affirmative.
SEE ALSO:
• Moving Away From an ‘Old Boys Club’ to Leading Diversity Initiatives
• 5 for 2025
Don Trone, GFS is one of the Co-founders and CEO of the Behavioral Governance Institute (formerly 3ethos). He is the former CEO and principal Founder of fi360; former Founder and President of the Foundation for Fiduciary Studies; former CEO of the Center for Board Certified Fiduciaries; and first person to direct the Institute for Leadership at the U.S. Coast Guard Academy.
