I am certainly not a scholar on the topic of “virtue,” which the Merriam-Webster dictionary defines as “morally good behavior.”
I’ve never read Aristotle’s treatise on what it means to live a good life or The Nichomachean Ethics, his best known work on ethics. But that won’t stop me from applying ancient philosophy to our 21st century world—because at some point in school I scanned Plato’s classic philosophical dialogue about virtue, the Meno.
At the beginning of that dialogue Meno, the title character, poses the following question to Socrates:
“Can you tell me, Socrates, whether virtue is acquired by teaching or practice; or if neither by teaching or practice, then whether it comes to man by nature, or in what other way?”
Frankly, I really don’t completely understand Socrates’ long-winded response to Meno’s question. He goes on a roll, mentions the Thessalians, and dudes named Aristippus and Gorgias. But translated into today’s vernacular, Socrates basically says, “Heck, I don’t know, and neither does anyone else.”
Meno, however, is like a dog with a bone; he continues his deliberation and concludes that virtue varies by gender, age, affluence, and power.
Here’s one reflection that struck me as particularly interesting in the context of the current election season:
“Let us first take the virtue of a man – he should know how to administer the state, and in the administration of it to benefit his friends and harm his enemies; and he must also be careful not to suffer harm himself.”
Moving from 300 B.C.E. to modern times, virtue or at least its contemporary definition of morally good behavior has emerged as front-page news across the country – whether it’s related to presidential politics, the increasing cost of pharmaceuticals, or how the Department of Labor (DoL) will require the financial services industry to act in an investor’s best interest.
As you know from previous posts, the DoL is requiring financial professionals to act in the “best interest” of clients. This means that the government will hold firms responsible for the actions of their field personnel. Ultimately, investors can have their cases adjudicated in a court of law.
The attempt to protect consumers is clearly a virtuous act, though Socrates would have likely ruminated on whether the industry will apply the regulation in a righteous and judicious fashion. Looking forward, firms will have to act in the best interest of clients to protect themselves under the law. This may well have some unintended consequences.
Advisors will probably ask owners of tax-deferred accounts to sign a “Best Interest Contract” that will be executed by the client and the firm. This action will pin responsibility and liability squarely on the firm’s shoulders.
The result? If an advisor does not meet the best interest standards under the rule, their companies could face millions of dollars in class-action suits.
To reduce this risk, the financial services industry may well place significant constraints on advisors’ ability to make product recommendations. They could also see cuts in compensation, an increased time commitment per client and more legal liability.
Consequently, there is a risk that small investors may face difficulties in obtaining and maintaining the services of qualified advisors. Depending on the firm, a million-dollar account could be viewed as small, while other practices may have that break-point pegged at $300,000.
New software applications designed to ensure enterprise-wide consistency will play a critical role in ensuring consistent application of best interest rules and documentation required by companies. In fact, HealthView is in the process of rolling-out retirement planning software to meet these requirements.
By most definitions, the DoL has embarked on a virtuous endeavor. The rule is designed to ensure that industry professionals behave in ways that meet ethical standards most of us would consider reasonable.
But doing what is right from a moral perspective will have consequences. Unfortunately, those in the most need of financial help may end up having less access to professionals who can help them most.
I’ll leave you with a question: if an action benefits some, but is problematic for others, is it still an act of virtue?
Something for philosophy majors to ponder…