Fi 360 Presentation By Wayne Miller 2008

From Process Back to Thought ProcessA Perspective on the Emotional Intelligence of Serving in a

Fiduciary Capacity.

Offered By: Wayne H. MillerChief Executive OfficerDenali Fiduciary Management

FI 360 National ConferenceMay 2008

The Human Condition

• Jim is married to his fifth wife.

• He’s a smart guy and financially very successful.

• Jim called me one day in a hyper excited state.

• He told me he had finally figured out “what it is with women.”

• I asked Jim if he recognized that he was the only common ingredient in his five marriages.

The Human Condition

• He was genuinely perplexed by the question and continued to speak of his discovery.

• He never paused for a moment to ask what I meant or why I asked that question.

• Jim was unable to efficiently process information regarding his relationships with women.

• He had no awareness of how his own shortcomings influenced his assessment.

• Jim’s sense of a new discovery missed this point.

• He has an emotional blind spot.

I suspect Jim’s four former wives already knew that.

The Human Condition - Exposed

Perhaps most importantly:

Jim missed the opportunity to learn something that would have been helpful to him – and others

around him.

The Human Condition - Exposed

• To everyone other than Jim, his blind spot was obvious.

• We call them “emotional blind spots” because these reflect the emotional foundation of a person’s identity.

The Human Condition - Exposed

• Someone with an emotional blind spot erroneously attributes meaning to information.

• A person lacking that emotional blind spot (a dispassionate observer) recognizes this attribution as a mistake.

The Human Condition - Exposed

Antidote to the Human Condition:

"We can't solve our problems by using the same kind of thinking

we used when we created them."

-Albert Einstein

1 + (n+1…) = > Chaos

• When individuals gather – their collective blind spots coalesce.

• Productive communication becomes more challenging with each new person added to the gathering.

• Form a committee and you now have a culture subject to this influence.

Welcome to the world of fiduciary governance.

Predominant Identity In A Fiduciary Culture.

“We are good people here.”

• This identity serves as an emotional shield.

• Its presence discourages the receptivity or digestion of information perceived to be counter productive to survival of the identity.

• It is the life blood of “group think”.

“We are good people here” …

• Maintaining the group identity is the group’s (unspoken of) highest priority.

• The efficiency and effectiveness of retirement plan management practices will suffer if this identity is unchallenged.

“We are good people here” …

• … is why fiduciary governance is so critical.

• Sound governance promotes fiduciary excellence.

• Embedded in it are processes that create distinctions between:

− purpose and identity

− learning and resistance

− substance and appearance

− action and talk

Perspective

Evolution:

In biological sciences, the name of the process that describes how various influences in the environment impact the nature and presence of genetic material within a given population.

Evolution is random not purposeful.

Evolution: A Fiduciary Imperative

Our Intention: make fiduciary processes purposeful.

Fiduciary “evolution”: Champion the proliferation of single thought process that accepts the premise of guardianship as quintessential to the role …

… and put no constraints on the application of that premise.

Observations

• In general, every actor on the fiduciary stage is conflicted.

• Some conflicts are overt - some not.

• An examination of the conflicts illustrate that it is the thought process of those actors that generates an on-going challenge for a fiduciary to be Purposeful.

Purposefulness and Process

If your fiduciary Processes allow for the accommodation of your Purpose,

for whatever expediency you think important,

you will be acting in a manner that is counter productive to the duty.

Is a fiduciary duty a solemn duty?

Critical Questions: Context

• Who identified what it means to be a fiduciary?

• Who has set the stage and framed the debate?

• How is the debate staged and adjudicated?

• How do we speak of it?

• What metrics do we use to identify fiduciary conduct?

Example #1: FI360 Practices

Practice 1.2.2. “All parties demonstrate an awareness of their duties and responsibilities”.

VS.

All parties involved in retirement Trust management will acknowledge the statutory language of the Exclusive Benefit Rule and the Prudent Man Rule over their signature.

The statement will disclose that the Prudent Man Rule is widely acknowledged to represent a Prudent Expert Standard of care.

Example #2: “Industry Standards”

No matter the exact definition you use, Socially Responsible Investing (SRI) is a small subset of the investable universe.

Example #2: “Industry Standards”

If socially responsible investing is a small subset of a much bigger investment universe,

… what should we call the bigger part?

Is it the socially irresponsible part or the socially unconscious part?

Example #2: “Industry Standards”

Why don’t we greet one another asking;

How is your socially unconscious portfolio doing?

Example #2: “Industry Standards”

• It is counter to the identity we have of ourselves.

• We want to avoid the feeling of knowing that others think of us as socially unconscious or irresponsible.

After all, WE ARE GOOD PEOPLE HERE.

Perhaps, we have more in common with our Advisory clients than we imagined.

Example #3: Let’s Make it Personal

Few investment advisors would stand in front of

their college age children and speak of building

their financial security (in part) on the strength

of buying the common stock of companies that

manufacture cluster bombs.

Example #3: Let’s Make it Personal

Most want to avoid feeling a loss of respect and admiration from their children.

Example #2: Let’s Make it Personal

Try explaining why they invest in such companies ANYWAY to a parent from Lebanon.

Cluster bombs (70% of which are made in the USA) routinely maim Lebanese children.

… and you thought “Personal” meant you.

Perhaps, we have more in common with Jim than we imagined.

Depending on what metric you use

to evaluate the authenticity of

fiduciary conduct your conclusion

regarding the appropriateness of

any activity may differ.

Prologue …

… like Jim, without the personal and

collective courage to examine our own

conduct, we will not come to know the

mistakes we are making.

Prologue …

Without a willingness to examine our

conduct for its consistency with the

values we proclaim, the

Purposefulness of serving in a

guardianship role will be subjugated.

The willingness to engage in a courageous conversation is now required.

- Inspired by poet David Whyte

Thank You.

Denali Fiduciary Management

“Built by Fiduciaries for Fiduciaries™”

wmiller@denalifm.com

(206) 463 6700