How to improve fiduciary outcomes in a volatile world

VUCA is the acronym for volatility, uncertainty, complexity and ambiguity. It’s used in business and the military to describe an environment that’s experiencing constant and unpredictable change; an environment that becomes increasingly less responsive to traditional management and planning approaches.

Consider the cascading crises of the past two years — the four P’s: pandemics, protests, politics and now Putin.

We're living in a VUCA world. To succeed as a financial adviser, you’re going to need to assume an even greater leadership role, for during a crisis your clients aren’t looking for a fiduciary. How you respond will reveal your true character, test the level of trust clients have in you, and shape your reputation and legacy.

Volatility: The rate, duration and magnitude of changes are greater today than ever before.

To improve fiduciary outcomes, slow your operational tempo, heighten your situational awareness and exhibit an even greater level of accountability. Demonstrate your capacity to enact a fair, just and transparent process to resolve moral conflicts or to allocate limited resources.

Uncertainty: There's a lack of predictability, and doubt about present and future outcomes.

To improve fiduciary outcomes, increase your communications cadence. When communicating, be more compassionate and less procedural. Focus on serving, not selling. Demonstrate your capacity to perceive changes and interpret these changes to determine whether and how they may impact a client’s goals and objectives.

Complexity: There is a multiplicity of factors affecting outcomes; it’s difficult to understand causes and effects because of different and numerous interconnecting parts.

To improve fiduciary outcomes, demonstrate your capacity to simplify complex procedures, and communicate sound solutions to what appears to be insurmountable problems. For most clients, investment decision-making will deplete their neurological energy. As fatigue sets in, their brain will begin to look for shortcuts. Rather than being prudent, they may become more risk-averse, irrational or even reckless. Rather than taking a long-term orientation with their investment strategy, they may become more short-sighted.

Ambiguity: There's a lack of clarity and a haziness as to who, what, why, when and where. Causal relationships are unclear; there are unknown unknowns; and there might not be a right answer.

To improve fiduciary outcomes, focus more on what can be controlled and less on what can’t. This will require that you make a friend of failure. Master the art of getting back up, grit, tenacity, resilience and perseverance.

We’re living in a VUCA world. This is going to require that you adjust and adapt your thoughts and behaviors to enact more ap­propriate responses to ill-defined, changing and evolving situations. It’s not just about being a fiduciary … it’s also about being a leader.

[More: 7 ways to improve fiduciary outcomes in 2022]

Don Trone is CEO of the new Center for Board Certified Fiduciaries, which is affiliated with the Wake Forest University School of Professional Studies.