Fiduciaries: You May Be Losin' That Lovin' Feelin'

Written by: Don Trone and Dr. Sean Hannah

Results of the 2018 Behavioral Governance Study

In 2018, were fiduciaries better at planning, or at implementing? Did fiduciaries demonstrate a greater capacity for character and accountability (driving procedural justice and moral and ethical decision-making), or for situational awareness and adaptability (driving social astuteness)?

To begin to ask such questions, this past year 3ethos released the industry’s first psychometric-based instrument 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.

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) – 35 (high):

Lowest scores for leadership and stewardship – scores can range from 0 (low) – 35 (high):

Governance steps ranked high-to-low – scores can range from 0 (low) – 35 (high):

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.

Related: Forget Everything You Thought You Knew About Being a Fiduciary with Don Trone

Based on these results, financial advisors should be mindful of the following in 2019:

Head the phrase “inquiry before advocacy.” Pay more attention to what clients 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% of the talking.

Be more collaborative and attentive to your clients 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’!

The Co-founders of 3ethos are Don Trone, L5; Dr. Sean Hannah, Mary Lou Wattman, L5: Rear Admiral Steve Branham; and Dr. John Sumanth.