What's a Fiduciary To Do? Considerations for Periods of Uncertainty
In the face of complex disruptions of the sort we have recently experienced, new challenges emerge and old challenges are exacerbated. For those who have undertaken fiduciary obligations to others, these challenges can be compounded when striving to meet duties to individuals experiencing anxiety and altered needs, while at the same time balancing your own similar stresses. Under such circumstances, there are familiar considerations that come into new light and may warrant careful thought as one analyzes how to best discharge one’s duties to beneficiaries.
Aspiring to Fairness in the Face of Inequality
Fiduciaries have long faced challenges with beneficiaries who equate fairness with an idealized view of equality. Because beneficiaries start in different places and have varied circumstances, these can often be difficult to reconcile to the satisfaction of all beneficiaries. A beneficiary “keeping score” in their respective family accounting book may not appreciate the fiduciary’s effort to satisfy what a grantor intended for beneficiaries. One beneficiary’s education might be more expensive and right for that person. For another some assistance with starting a small business might be the right justification for a distribution. In the best of times it can quickly devolve into a reactionary game of “if he gets that I should too,” despite vastly different life situations.
When stress and uncertainty are heightened, it becomes all the more important to find the right words to harmonize what can seem unequal on the surface. Calm, careful, and well-reasoned analysis communicating to all of the beneficiaries why some thrive on apples while others require oranges may help de-escalate a brewing dispute—and if not, a fiduciary will have created a helpful record justifying the exercise of discretion. When preparing such analyses, fiduciaries should also consider their broader audience—including attorneys who might be asked to evaluate a situation at the request of a beneficiary and ultimately any fact finders in the unfortunate, but all-too-common event that the discretion is challenged.
Maintaining the Long Game in the Face of Perceived Scarcity
The mindset associated with “a bird in the hand is worth two in the bush” can wreak havoc when beneficiaries are feeling uncertain about their individual situations. Where a trust may have been set up to look out for one or more beneficiaries over an extended period of time, shifting societal and economic environments can lead some beneficiaries to say “well, I’d feel a lot better if I had mine in hand right now.”
Here a fiduciary’s ability to educate about historic trends and the dangers associated with emotional decision making are at a premium. We have many tools at our disposal, including informational town-hall style presentations, regular and consistent written updates, and one-on-one discussions. Those who prudently utilize these and similar tools will certainly have a greater likelihood of helping beneficiaries stay focused beyond present urgencies.
Putting a Premium on Communication
Beyond the provision of substantive information, any communication can be a salve in times of heightened anxiety and instability. This is because when a beneficiary is worried and without access to other voices and views, many often imagine the worst. A beneficiary’s knowledge that you are thinking about him or her and paying attention to the present realities, even if you lack any immediate solutions or a magic wand, can reinforce the trust and confidence that a fiduciary has worked so hard to build.
In addition, more frequent two-way communication with beneficiaries will provide access to advance intelligence if real or perceived problems are brewing. Even remotely, one can pick up the tell-tale signs of stress or conflict. The value of such communication does come with a cautionary caveat that fiduciaries will not want to be perceived as communicating with some beneficiaries more frequently than others. Combinations of open forums and transparent equal opportunity to schedule one-on-one conversations can help alleviate some of the risk that such efforts later fall into the category of “no good deed goes unpunished.”
Keeping Abreast of Expertise Outside of Your Lane
With major social or economic shifts, the unknowns can be not only deep, but also broad and interlocked with a variety of trends, forces, and industries. Recent months have compelled fiduciaries to quickly develop increased working knowledge, if not expertise, related to everything from global supply chains to the benefits and limitations of various technologies. It can be overwhelming. But fortunately, in our highly connected world, information and training is often but a few clicks away.
Of course, previous challenges in this regard persist and are perhaps exacerbated, including sorting through vast quantities of information and—particularly when it comes to rapidly increasing uses of technology—attendant issues associated with privacy and regulatory compliance. Once again, here a fiduciary does not need anything new so much as to do it differently. Informal virtual conferences and list-services can bring small groups of fiduciaries facing similar challenges together to crowd-source everyone’s efforts and get the best information more quickly. If you do not have access to an industry list service, consider researching to find one that seems like a good fit. In addition, consider joining or forming a group that gathers virtually on a regular basis to compare notes and experiences specific to the present challenges. And importantly, there are times when a fiduciary needs to recognize the need to recommend a consultation with outside experts, such as financial consultants and other advisors. Fiduciaries may also consider the value in seeking the assistance of counsel to assist with the coordination and provision of information and/or access to such financial consultants and other advisors.
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