In a world of overwhelming and sometimes unreliable data, growing use of AI and social media as a news source, it can be hard to know what’s true or real. At the same time, while defined contribution plan sponsors can be overwhelmed by ERISA rules and regulations as well as making critical investment decisions for their employees, the authenticity meters of HR professionals are very strong. Being authentic is equally critical for participants and individual investors.
Webster picks the work of the year based on searches. They commented:
A high-volume lookup most years, authentic saw a substantial increase in 2023, driven by stories and conversations about AI, celebrity culture, identity and social media. Although clearly a desirable quality, authentic is hard to define and subject to debate—two reasons it sends many people to the dictionary.
Most conversations around authenticity tend to focus on whether you’re acting like a relatable, normal person or putting on a front for the people around you. It’s an important distinction: Coming across as phony can be alienating, while conveying authenticity can help you amass popularity and inspire others, surveys show.
The Urban dictionary defines real talk as:
The philosophy of talking candidly and openly and honestly without fear of what others might think usually for another's benefit to let them know of something that is usually hard to discuss … to let others know that you are talking honestly and sincerely and that what you are expressing is not a joke and that you are unabashedly being true to your own thoughts and feelings.
Advisors who are real or authentic will resonate, especially for plan sponsors acting as fiduciaries making critical decisions on other people’s behalf. Those that come across as salespeople pitching themselves or products they represent will suffer. Using arcane language littered with acronyms and code sections not being transparent about how they are being paid and how it might affect their impartiality will only hurt.
To be a fiduciary or, even better, a steward, means to put other people’s interests first, which requires good listening skills that few salespeople possess. In addition, good fiduciaries eliminate potential conflicts of interest that could affect their decisions.
The proposed DOL Retirement Security Rule will make every advisor that touches a 401(k) plan as well as those that advise participants on their rollover assets, a fiduciary. And though retirement plan advisors and ERISA professionals have been steeped in the idea of being a fiduciary, it’s not true for all financial services professionals, which is a distinct advantage as lawmakers and courts keep creating higher hurdles.
So in a world of gaslighting, claims of fake news and pseudo AI advisors potentially using biased or inaccurate data and programs that tilt advice in certain directions, being authentic becomes even more important for advisors.
Behavioral finance took the DC and advice world by storm because it is real. Rather than rely on basic economic theory assuming people will act rationally, befi uses psychology to understand how people really act and then creates processes like auto-enrollment and escalation to lead them to better outcomes.
Authenticity is the next step in this evolution, which should result in greater trust and engagement. Joe Duran, founder of United Capital, once said at a conference that every financial plan is wrong the instant it is created because it makes assumptions about a person’s life and the economy that are hard to predict and will undoubtedly change. Starting with that admission about not knowing and then listening to a person’s needs and fears while promising to make changes as needed is disarming, different and necessary in a world that is becoming less authentic.
As wealth, retirement and benefits converge at the workplace and as the small/start-up plan market explodes and almost very rollover either to an IRA or annuity becomes a fiduciary act, the need for authenticity will only become more critical for RPAs advising plan sponsors and participants in their plans without conflicts of interest and with full transparency, as well as wealth advisors helping their clients with DC plans even as they outsource some of their fiduciary duties to third parties.
If you never walked away from a prospect realizing you are not a good fit recommending a colleague or have not advised a client that they should conduct an independent RFP or select another advisor because their plan and circumstances have changed, it’s really hard to argue you are authentic.
Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.