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I hadn't been applauded for kissing my wife and walking down an aisle since our wedding day.  However, this time the aisle in question was on an airplane instead of in a church.  And the mood was more factious than festive because a family had been split-up instead of joined together.  A mother (with infant twins) and a grandmother had seats relatively close together, but the husband's assigned seat was about a dozen rows away.  To further complicate the matter, it appeared that neither woman could speak English and the husband's English skills were very limited.  However, that had not stopped him from negotiating a couple of seat-swapping deals, including one with an obviously very drunk passenger.  What the attendant was trying to do was to get everyone back to their assigned seats before initiating any changes.  In addition to the fact that no one was listening to her, the attendant had another problem that could not be ignored.  The three adults and two children were now together in a three-seat row in violation of FAA rules because there were only four oxygen masks for the five people. So, the attendant couldn't leave things as they were, but the husband--who was in paternal protection mode--wasn't about to leave his family.

It was at this point that I decided to pull an Alexander Haig and take charge, even though I didn't have the authority.  Since I assume nothing (a characteristic of "people on the autistic spectrum," according to author Caroline Scott) the first thing I did was look for an empty seat, even though it was a supposedly full flight.  To the surprise of the attendant, I found one. After that, the rest was simple. The puzzle could be solved in two moves.  The husband would take my seat across from his family and next to my wife, and I would take the empty one a half dozen rows back.  However, I couldn't resist hamming it up a bit.  So, in response to the attendant's question about not sitting with my wife, I said, "We've been married for 40 years, we can sacrifice four hours apart."  And then to a ground swell of applause and "aahs" I turned to my wife, gave her a big kiss, and headed down the aisle. Problem solved.

When you have a lot of problems, you get a lot of practice solving problems.  I wouldn't say that I have more problems than other people, it's just that my brain makes everything a problem.  For most people, the myriad of daily decisions about what to wear, what to eat, and how to prioritize tasks are so routine that they don't even consciously think of it.  But for people on the autism spectrum, "the process of problem solving can be quite a challenge," says Sherry A. Moyer in an Autism Support Network article.

It's not that I can't figure things out, it just takes me a little longer.  That's why the same teacher who originally referred to me as "retarded" reassured my mother that "Once Guerdon figures things out, he never forgets."  However, figuring out school was difficult.  To do that, I had to hand copy my textbooks to get what I had missed in class because I couldn't understand verbal instruction. Basically, I had to work twice as hard to be half as good.  To excel, I had to work ten times harder.  But the hard work turned a weakness into a strength.  Alan Turing, the inventor of the computer, could have had me in mind when he said, "Sometimes it is the people no one can imagine anything of who do the things no one can imagine."

As a financial advisor, it seems that I'm still doing things that others can't imagine.  That's why an attorney once introduced me as "The best at what he does, unfortunately, no one knows what he does."  That was especially true when I switched to a fee-only structure and an academically based investment strategy, as well as started studying retirement distribution law and fiduciary responsibility issues.  The driving factor in all those pursuits was a desire to better serve my clients.  In the process, it made me half of rich and famous.  While the notoriety was nice, I didn't do it for the applause.  Like the situation on the airplane, I just saw a problem that needed to be solved and I did what I do best - solve problems.


I figured I was going to hell because disgust would not have been my reaction. I was a normal 16-year-old boy with raging hormones and my Sunday school teacher was explaining the story of Joseph and his master's wife. For those of you who do not know the story, Joseph was a Hebrew slave in ancient Egypt who, because of his skill, was put in charge of all the financial affairs of his master's household. The plot of our little 1900 B.C. soap opera revolves around the good-looking wife of the master attempting to seduce the handsome young slave. He persistently rebuffed her advances, but she would not give up. Finally, on a day when the house was empty, she grabbed Joseph by the cloak and ripped it off. His response was to run. My hell-fire and brimstone Sunday school teacher explained that Joseph ran because of his disgust for what she desired. I was only appalled because - while I knew it was wrong - I would have found her appeal appealing. Years later, a friend explained that Joseph ran because it is easier to avoid temptation than it is to resist it, which made more sense and eased my concern about myself.

I bring up this story because it is a perfect allegory for the new Department of Labor (DOL) fiduciary rule. Before this rule, there were two standards for individuals giving advice on retirement plans - the fiduciary standard for registered investment advisors and the suitability standard for insurance agents and stockbrokers. Under the fiduciary standard an advisor had an absolute duty of loyalty to a client. It wasn't all that much different from Joseph's duty to his master, except an advisor got paid a reasonable fee. However, the suitability standard was less stringent. Conflicts and self-interest were permitted. So, higher costs and higher commissioned alternatives could be recommended as long as the investment product was appropriate for the client's risk tolerance.  If this lesser standard were applied to Joseph, messing with the master's missus could have been justified as long as it didn't get out of hand.

Unfortunately, the messing around with fees charged to retirement plans too often did get out of hand. So, according to a WealthManagement article by Elliot Weissbluth, the DOL decided to impose the fiduciary standard on any person paid to give advice to retirement plans. "Well... sorta." While the new standard applies evenly to advisors as well as brokers and insurance agents, it is in his words "watered-down." He, along with a significant segment of fiduciary advocates, believes the DOL made too many "...concessions to those who stood to lose money by fully adopting the idea that the client's interests must come first." Ron Rhoades, in, explained that, in essence, the DOL moved the fiduciary standard from "sole interest" to "best interest."

The difference between the two is that sole interest requires the avoidance of any conflicts of interests whereas best interests allows conflicts, provided a certain set of criteria are met. As John H. Langbein explained in the Yale Law Journal, sole interest recognizes the danger that a fiduciary "...placed under temptation will allow selfishness to prevail..." and best interest recognizes "...a central truth: Conflicts of interest are endemic in human affairs, and they are not inevitably harmful." So, if avoidance is the preference and the criteria for the allowable conflicts are "...properly applied, the best interest standard is not that far removed from the tough sole interest standard...," says Rhoades. However, "...applied incorrectly, substantial harm can result."

And, therein lies the rub: the DOL's allowable conflicts -- referred to as the Best Interests Contract Exemption -- must be strictly interpreted and applied for the new rule to work. Because Joseph knew what Oscar Wilde quipped, "I can resist everything except temptation." When the standard shifts from avoidance to rule-based resistance, the temptation is to push the limits of allowable actions by quibbling over the definition of sex or the meaning of best interest. If that happens, then the fiduciary standard would go to hell in a handbasket and that really would be disgusting.

“Oh, about a thousand times,” was his answer to both questions. But even though the words were the same, the sentiments were different. The first was factual and the second revealing.

I had gone out to play golf and ended up being paired with a gentleman I had never met. Upon learning that he was a retired Navy pilot, my curiosity caused me to ask my first question. “Did you ever land on an aircraft carrier?” And his affirmative response led logically into my second question. “Were you ever afraid?” The fact that a thousand repetitions hadn’t eliminated his fears was very telling.

According to G. Warren Hall, a NASA test pilot and retired Navy pilot, it is always scary landing on an aircraft carrier, but there is noticeable “pucker factor” to night landings. He says, “pucker factor” is knowing you're betting your life on a nearly perfect performance - but with less-than-perfect information, in a harsh environment, with anxiety at its peak, and when you don't feel comfortable because you don't fly enough at night to feel comfortable or proficient.”

In his book, Your Money and Your Brain, Jason Zweig says it is “…no different when it comes to money. Every investor’s worst nightmare is a stock market collapse…” And since the Great Recession of 2008, the pucker factor of that fear has greatly intensified. John Bogle, the founder of Vanguard Funds, in a New York Times article, described the current investment environment as “…the worst…for investors that I have ever seen – and after more than 60 years in the business, that’s saying a lot.” In the Black Swan, Nassim Taleb says, “We have never lived before under the threat of a global [financial] collapse… I shiver at the thought.”

Plane crashes and stock market crashes are both so frightening, explains Zweig, because the mental imagery of “…the consequences of a crash…[are] so horrific, while the probabilities of a crash evoke no imagery at all.” Daniel Kahneman, in Thinking Fast and Slow, adds that “…we tend to judge the probability of an event by the ease with which we can call it to mind.” That’s why a survey referenced by Zweig found that investors believe “…there’s a 51% chance that in any given year, the U.S. stock market might drop by one-third. And, yet, based on history, the odds…are only around 2%.”

While you would have to be a fool not to be afraid of the stock market, prudent investors need to rationally assess the risk. By obsessing on the consequences and overestimating the probability, we tend to overstate the risk. As my studies and Zweig’s writings explain, “The real risk is not that the stock market will have a meltdown, but that inflation will raise your cost of living and erode your savings.” He continues by saying the vivid fear of a stock market crash causes investors to “…overlook the more subtle but severe damage that can be dealt by the silent killer of inflation.”

My new golfing buddy confirmed that the “pucker factor” of a night carrier landing is an eleven on a scale of one to ten. He told me, “You can’t imagine the adrenaline rush. It’s terrifying and exhilarating at the same time.” With emotions running so high, he said, pilots need to strictly follow procedures to keep from making deadly mistakes. Investors need to do the same thing. That’s why, as fiduciaries, we follow a prudent process that balances risk and return. So “…long-term investors must hold stocks, because risky as the market may be, it is still likely to produce better returns than the alternatives,” says Bogle. And if I have said that once, I have said it “Oh, about a thousand times.”

“I never knew how much you loved me.” That was the remark of my nephew to his mother (my sister) after the birth of his first child. Until you have a child, you just can’t understand the feelings. You would do anything for this helpless little bundle of joy. Although, after months of sleep deprivation and a mountain of dirty diapers, you realize that God made babies cute so we will put up with them.

Rearing children is probably the biggest responsibility most of us will ever face. And to do it right, we have to deal with our children based on what they need, not what we want or need. If you think about it, it’s probably the best example of fiduciary responsibility. A parent is required to unselfishly provide for the needs of his or her dependent children and a fiduciary is required to unselfishly manage assets in order to provide for the financial needs of some other individual, group, or entity. While both parents and fiduciaries have legal obligations, I think the moral responsibilities are the more compelling.

That’s why I believe that anyone who is responsible, either directly or indirectly, for the management of other people’s money is morally a fiduciary, even if he/she is not legally one. And, for me, that includes public officials and employees. While there may not be a legal fiduciary standard for the public sector, there is a strongly implied moral one in the term, “public servant.” However, when you see the little town of Bell, California paying the city manager $750,000, the police chief $450,000, and the city council members $100,000 each, you begin to wonder who is serving whom. While Bell was an extreme case, “baby Bells” are all too common. Whereas, in the private sector, you make money by cutting salaries and expenses, in the public sector you make money by doing the opposite. Bloated staffs and budgets are the justification for bloated salaries. And when you run out of money in the current budget, you create unfunded liabilities that appear to be funded because, says Joshua Rauh of Stanford University, “… the costs that are being ascribed by the governments today are a lot lower than the true costs.”

The Economist says, “…a good starting point… [for] cleaning up the mess in…governments…would be to abandon the accounting tricks.” I think a better starting point would be for the public sector to become public servants again by adopting a fiduciary standard. As fiduciaries, they would have to abandon accounting tricks and other self-serving practices because they would be required to act in the best interest of the taxpayers using due care in the decision making process to insure the accuracy of information, the minimization of cost, and the transparency of actions.

Abandoning old tricks won’t be easy because, “There is so much money in [and]…around government that it is very easy to do well instead of doing good,” writes Mark Leibovich in his book, My Town. He says "You still hear the term 'public service' thrown around, but often with irony and full knowledge that self-service is now the real insider play." But I refuse to accept that it has to be that way. However, to make the change, public service must be seen as a calling, instead of a career. Like being a good parent, it’s all about doing what is right - not what you would like.

Upon the birth of his first child, my nephew was overwhelmed by a sense of parental love. As time has passed, I can imagine he has become increasingly aware of the depth of his responsibility. Public employees and elected officials need to have that same sense of responsibility. That means using tax- payer money wisely and doing what is in the people’s best interest, even in the midst of a mountain of work and putting up with people that are anything but ‘cute’.

Do you know the difference between girls and boys? If you were a janitor in a junior high school, you would. Boys write four-letter words all over the walls. Girls write the same words, but they string them together in sentences that defame another person. The other thing you will notice is how often boys misspell four-letter words.

Forty years later, I’m no longer a janitor but I’m still cleaning bathrooms. I regularly clean the bathrooms in my office building. The experience has shown me that as we get older, gender differences remain. Women tend to pick up after themselves and men don’t. And while I’m wondering about the differences between the sexes, you’re probably wondering if I’m the boss, “Why the heck am I cleaning bathrooms?” I do it to keep myself humble. And that’s important because judging myself more realistically enables me to judge other things more accurately.

This conviction is shaped by both my moral beliefs and by my insights into neuroscience, because humility is not only a virtue but also an empirically verified necessity for good judgment. As Philip Tetlock, author of Expert Political Judgment, discovered when testing experts for good judgment, “...who experts were…*and+ what experts thought…made scarcely an iota of difference…but how experts thought…did matter.” He observed that those who tested best shared the ability to make brutally honest self-assessments. So he concluded that good judgment is more dependent on being able to change your mind “…when you get it wrong…” than it is on getting it right in the first place. Daniel Kahneman, in Thinking Fast and Slow, explains why this is so. He describes it as “…a puzzling limitation of our mind: our excessive confidence in what we believe we know, and our…inability to acknowledge the full extent of our ignorance and the uncertainty of the world we live in [causes us]…to overestimate how much we understand about the world and to underestimate the role of chance in events.”

In other words, arrogance (about our abilities) and ignorance (about the laws of chance) are our two biggest obstacles to good judgment. That means the remedy for bad judgment is humility and knowledge. While this may be insightful, it isn’t new. A couple of hundred years ago, William Penn said, “Humility and knowledge in poor clothes excel pride and ignorance in costly attire.” And I would argue that humility is the more important of the two. As Socrates ironically discovered, he was the wisest Athenian - not because he knew more than anyone else - but because he was more aware of his ignorance.

While good judgment is important when managing your own affairs, it is more important for fiduciaries, because they are in positions of authority over financial assets that are not their own. Whether you are responsible for grandma’s money, a foundation’s endowment fund, a company retirement plan, or client investment accounts (as I am), you are legally required to follow a “…standard of prudence,” which is nothing more than a legal term for good judgment.

You don’t have to be a janitor to know that men are different from women, but the writing on the wall is not so clear when it comes to the attributes that differentiate good judgment from poor judgment. Tetlock discovered that the main difference is humility. So anything you can do to keep yourself humble is a good thing. And that’s why I clean bathrooms.

"I don't know. Maybe it's magic." That was Calvin's answer, in one of my favorite Calvin and Hobbes comic strips, to his teacher's question about why two plus two equals four. Calvin's attitude toward math is similar to the mind-set of many investors, including countless fiduciary investors. However, success in mathematics, investing or any other endeavor isn't achieved by magic. And there isn't anyone who knew this reality better than John Wooden, the late legendary UCLA basketball coach.

I actually met the famous coach or, more accurately, I should say we mutually acknowledged each other's existence. It was my first visit to Pauley Pavilion. UCLA was playing Santa Barbara and I went down to Westwood to see my roommates play in the game. I got there early and took a seat among the Santa Barbara fans. Turning to my right, I was surprised to see Coach Wooden sitting next to me. He returned my stunned stare with a cordial smile and a slight nod of the head. For him it was a truly forgettable moment but, for me, it was one of those rare "shock and awe" moments that make life so interesting.

My magical moment occurred in the middle of UCLA's unprecedented run of seven consecutive national championships. By the time Wooden retired, he had ten championships in all, the highest winning percentage in history, and other amazing records too numerous to mention. He truly was "The Wizard of Westwood," a moniker he was reputed to have hated. My guess was that he disliked the "wizard" nickname because it implied that success was somehow magical, the result of some kind of supernatural luck or divine powers. For "Coach," the title he preferred, success was the result of effort; "...It's knowing you did your best..." And doing your best consisted of building blocks of personal qualities and behavior that he organized into his Pyramid of Success.

The cornerstones of Coach Wooden's philosophy are hard work and enthusiasm. At the apex sits success. Applying his teachings to fiduciary investors, I find very interesting the similarities between his building blocks for success and the duties required of fiduciaries to build successful portfolios. For example, the middle tier of the Pyramid of Success consists of the blocks of Team Spirit, Skill, and Condition that are analogous to the duties of Care, Skill, and Caution which are found at the heart of fiduciary law. Just as Wooden's Pyramid needs these core blocks to build toward success, so fiduciary investing requires the reasonable exercise of Care, Skill, and Caution to satisfy the standard of prudence, the apex of success for fiduciaries.

The core of Wooden's Pyramid consists of Team Spirit, Skill, and Condition because success in basketball depends on each player sacrificing for the team, properly executing the fundamentals, and avoiding excesses by practicing moderation. Likewise, the use of Care, Skill, and Caution are at the heart of satisfying the standard of prudence because the fiduciary needs to pay attention to the objectives of their beneficiaries, to understand and execute the fundamentals of economic theory, and to avoid extremes by properly balancing risk and return.

Contrary to Calvin's beliefs, success isn't magic, it is the result of hard work and following clearly definable principles. Wooden always reminded his players "that it was up to each of them to become as good as they could become with the gifts and talents they had been given and in the circumstances in which they found themselves." Fiduciaries, like basketball players, need to listen to the Coach.