Do We Need an Easy Button for Fiduciaries?
I love my Easy Button. Designed by some clever person at office supply company Staples, I press it every few days to remind myself that solving a particular problem is possible.
You might be thinking that this all sounds silly. It's certainly not rocket science but even the most capable among us sometime need a low-cost and humorous reminder that things are not as bad as they seem, that we can achieve an end goal if we take a breath, regroup and map out a step-by-step approach. If a problem is perceived as too complex, difficult to reconcile and too hard to tackle, how can anyone possibly move forward?
Apropos to pension governance, there is an urgent need for simplification and reassurance that the process of effectively discharging fiduciary duties is possible, practical and unlikley to break the bank (in terms of time, money, energy, stress, reputation).
Fear is a big factor that can both overwhelm and paralyze. At a time when pension liabilities are mounting, sweeping regulations are on their way and millions of employees are about to retire on what they think is their guaranteed nest egg, we can ill-afford to have fiduciaries look the other way because things are too hard.
To the contrary, we need people with courage and leadership skills to stand up and be counted. This is often a Herculean task with respect to anything having to do with pension risk. Why? Good people often cower at the mention of tools and techniques such as Value at Risk, Enterprise Risk Management, Derivatives, Risk Budgeting, Liability-Driven Investing, Stress Testing, Fat Tails, Model Risk and so on. For those fiduciaries with a limited background in finance, let alone investing, the fear factor is significant.
Is there hope? Absolutely. For one thing, fear can be managed as long as it is first recognized. According to the author of "One Small Step Can Change Your Life : The Kaizen Way" and pioneer in the area of success research, Dr. Robert Maurer asserts that fear can be a powerful tool to prepare us "for action", adding that "fear is nature's gift to awaken us to the possibilities". Then it's up to us to take one small step at a time to effect change.
Certainly a move in the right direction is an acknowledgement of those in charge that fiduciary education is a sine qua non of pension governance. To that end, this author will continue her efforts to inform and empower by trying to make complex concepts more understandable. (While the list of future topics is long, suggestions and comments are always encouraged. Email pension@bvallc.com.)
As Confucius once said, "A journey of a thousand miles begins with a single step."
