Last time, for the first time in our years of blogging, we broadened our scope to include the political realm. That, perhaps, may have left a question lurking somewhere in readers minds along the lines of “Why is this blog, which for years has focused entirely on fiduciary governance and practices for employee benefit plans and sponsors, bringing this to my attention?” Were we, you may have wondering, stepping way outside our mission and range of expertise? Our response, quite simply, is no, we most emphatically are not.
The role of a fiduciary, any fiduciary, is foundationally one of trust. In a representative republic like ours, trust is foundational as well. Without it, the framework is weakened and will, if not restored, eventually collapse. There is a parallel here that, in our mind, needs to be both explored and more clearly elucidated. In coming weeks we will do just that.
Today, we begin at the foundation: trust.
Don Trone, for many of us the trailblazer and way-maker in the realm of fiduciary practice and governance who, along with an impressive group of academics with whom he has aligned himself and 3ethos, the firm he co-founded after spending a year leading the U.S. Coast Guard’s Leadership Institute, recently published a short column at 401K Specialist on fiduciary well-being and the importance of trust. In that post he details “three essential, active ingredients to establishing trust.” They are “benevolence,” “integrity” and “credibility.”
Given that survey-after-survey document abysmal levels of trust in both the financial services industry and the government of the United States, it seems like a good idea to spend some time better understanding what’s entailed in the dynamic of establishing and maintaining this most foundational and necessary character in human relationships:
The hallmark here, Don says, is that “Employees must believe that the organization is acting in their best interests.” He goes on to say that trusted organizations “achieve higher levels of trust by sharing visions and strategies…in order to gain commitment and to ensure alignment.” In other words, openness, transparency and shared goals; a sense not only of community but of being a valued, contributing member of a like-minded group is how trusted (and trustworthy) organizations operate.
“Trusted organizations…enact fair, just and transparent processes…They have a well-defined ethos and can demonstrate a balanced continuum between the organization’s core values, behavior, and governance.” As we will show in future posts, the kind of “ethos” to which Don refers is the essence of what fiduciary status entails, whether we’re talking about the realm of financial advice or government service.
It isn’t about rule following, as important as rules can be as markers on the path. Rules only get us so far, for one thing, and are easily skirted, undermined and circumvented. This is especially true when lack of accountability becomes institutionalized as, in our view, it was for a very, very long time in the financial services industry (and still is an ongoing challenge that none of the regulatory agencies is successfully addressing).
The same is the case in government as the issue of trading on inside information by elected and appointed government officials that began our series indicates. Americans have a tendency to think that what we are experiencing is unique to us and, often, new. In fact, there are strong precedents and parallels to our current political quagmire that we’ll explore and from which we, as a still somewhat self-governing people, can learn to take action.
“The organization must demonstrate the ability to adjust and adapt to an ill-defined, ever changing, and increasingly complex world.” I want to focus briefly here on the key word in this sentence: “Demonstrate.” The standard by which an organization’s effectiveness is measured is its demonstrated ability to create a framework in which responsible individuals are able to manage personal and institutional impediments.
As we develop our series, we will endeavor to answer the question of what, in fact, are the goals of self-governance that the Framers and Founders set for themselves and, by extension, for us and whether our government is, in any sense of the term, demonstrating its ability to achieve them.
 Trone, Don. “401K Fiduciary Well-Being and the Importance of Trust.” 401K Specialist. March 8, 2019. Accessed 3/9/2019.
 Here I follow a common distinction between those who substantially participated in, even if only by consistent attendance, the Philadelphia Convention of May – September 1787 and those who, including many of the former, who actively participated in the various state ratification conventions in the months and, in the cases of North Carolina and Rhode Island years, that followed by referring to the former as “Framers” and the latter as “Founders.”
Ed Lynch is founder and CEO of FPG. He has worked with ERISA-qualified plan sponsors and designated fiduciaries in most aspects of plan development and maintenance since the early 1980s. Ed founded FPG with the mission to be a leader in the field of employee benefits and the most trusted source of information and evaluation in the retirement plan industry.