When you’re advising clients who are serving in a lay-fiduciary capacity – when your clients are managing the assets of a pension plan, foundation, endowment, or personal trust – you need to be watchful for decision-making fatigue.
Fiduciary decision-making requires a mental discipline that can deplete one’s neurological energy. As fatigue sets in, a person’s brain will begin to look for shortcuts. Rather than being prudent, lay-fiduciaries may become more risk adverse, irrational, or even reckless. Rather than taking a long-term orientation with an investment strategy, they may become more short-sighted.
The new field of Neuro-leadership informs us that an exemplary leader (fiduciary) will have greater neurological capacity in six areas:
As a professional, you should know your lay-fiduciary clients well enough to be able to recognize when they may have a blind spot with one or more of these neurological markers. During duress or when fatigued, it likely will be their blind spots that will drain their mental energy. If they’re not good at something, they’ll be even worse at that activity when they’re tired.
There are 7 ways that you can help your lay-fiduciary clients overcome decision-making fatigue:
1. Employ checklists. A well-designed checklist can dramatically reduce decision-making fatigue, and also be an effective risk mitigation tool.
2. Keep it short and simple. When operating in an environment that is volatile, uncertain, complex, or ambiguous – when you’re operating in a VUCA world – short and simple is a critical success factor. Under duress, complex strategies can tax key decision-makers at a time when they can least afford to be mentally fatigued.
Everything should be made as simple as possible, but not simpler. (Albert Einstein)
3. Offer snacks; not meals. Neuroscience informs us that an adult will retain more mission critical information if the material is carved up into bite-sized pieces, and served on a frequent and regular basis. Such an approach is a superior alternative to the ubiquitous hours-long Power Point presentation.
4. Generate a graphic. The average adult has an attention span of seven seconds. If you can take a page of words or data and reduce it to a single graphic that can be absorbed in less than seven seconds, you will dramatically increase the probability that key concepts will be remembered and mental energy will be conserved.
5. Be transparent. Prepare briefing notes and agendas so that clients don’t have to waste mental energy searching for your objectives.
6. Eliminate legalese and industry jargon. Complexity often is an inhibitor to the formation of trust, and a low trust environment requires a person to expend more neurological energy. This is just one of the reasons why we keep saying that new fiduciary standards that are based on complex disclosures and rules are causing clients more harm than good.
7. Provide training on a universal decision-making process. You can have far more impact on your lay-fiduciaries if you teach them a decision-making process they can use every day, as opposed to a fiduciary process they only may use once a quarter. If your clients are regularly using a universal decision-making framework, they’ll have far greater neurological capacity to deal with their other fiduciary responsibilities.
Eighty-percent of our nation’s liquid investable wealth is in the hands of 8 million lay-fiduciaries. The effectiveness of these lay-fiduciaries are greatly diminished every time their brains are turned to mush.