3 Reasons for the Erosion of Moral Discernment: The Dark Side of Fiduciary

Fiduciary has become a marketing term/tool, and is no longer: 

  • A gold standard.
  • Synonymous with trust.
  • Associated with moral discernment.
  • It has become a marketing term/tool. 

There’s a common spirituality that links exemplary fiduciaries; it’s their non-negotiable approach to moral discernment. They demonstrate a greater neurological capacity for binding procedural justice (moral discernment) with procedural prudence (prudent decision-making).

Unfortunately, the exemplary fiduciary is becoming a rarity. There are three reasons why:

1. Complex disclosures and rules.

Exemplary fiduciaries have a well-defined sense of purpose, and are passionate and disciplined about protecting the long-term interests of others.

However, advisors and brokers who have never been subject to a fiduciary standard will find that their capacity for moral discernment is negatively impacted by new complex disclosures and rules.

When our brain is overtaxed, it will tend to look for decision-making shortcuts. Complexity desensitizes our capacity for moral judgement and makes us more vulnerable to an ethical lapse.

2. Pay-to-play.

Many of the sins of our industry start out as a reasonable practice, but then become problematic when the same practice becomes excessive.

For example, since 2008 we’ve seen a dramatic increase in the number of conferences. Not because there’s more thought leadership to be shared, but because conference coordinators have discovered they can squeeze exhibitors and sponsors for large fees in exchange for prime speaking slots.

Also since 2008, we’ve seen a dramatic decrease in muckraking. Certain groups with very deep pockets have hijacked the fiduciary movement for their own self-interests. They’ve spread their money about to ensure that reporters and fiduciary pundits turn a blind eye.  

The cumulative effect of pay-to-play is that the value of fiduciary intellectual capital has become deeply devalued.

3. Compliance and legal opinions have become the prosthesis for moral discernment.

Not everything that is legal is ethical; and not everything that is ethical is moral.

Yes, that’s a bit of a mind bender, and that’s the point – there’s no longer a bright line between right and wrong. Fiduciary has become a field of grey.

There used to be a significant lost opportunity when one made a commitment to abide by fiduciary standards. One could make a lot more money doing what everyone else was doing, but exemplary fiduciaries have chosen not to because of their values and sense of purpose.

Today, little-to-no sacrifice is required to become a fiduciary. If you can put a checkmark in the box prepared by legal counsel, you’re good to go. There’s far less need for moral discernment.

Fiduciary responsibility has always been a high standard, but recent industry changes have caused the standard to be less than exemplary.  

But, that’s about to change. We’ll soon be announcing a new industry initiative.

In the very near future, fiduciary will once again be:

  • A gold standard.
  • Synonymous with trust.
  • Associated with moral discernment.

We’ll be back.

Related: 3 Fiduciary Modes: Know How to Evolve From Good to Great