Forbes Column by Chris Burnham: What Does Being A Fiduciary Really Mean?

Thirty-eight years ago this fall, on a parade deck in Quantico, Virginia, my mother pinned on me the gold bars of a new Lieutenant of Marines. From my earliest moments in the Marine Corps, we were inculcated with the motto of the Corps, Semper Fidelis—”Always Faithful.”

That sacred oath, to the U.S. Constitution, to the people of our nation and to my fellow Marines to be faithful, no matter what the hardship or challenge, weather in combat or in peace, is the omnipotent and omnipresent element that continues to bind Marines today, whether serving, released, or retired.

The Latin word, fidelis – “faithful” – however, is not the sole property of the USMC. In fact, 800 years before the founding of the Marine Corps, English law used it as the basis of the word, “fiduciary,” or someone who will faithfully manage the property of warrior knights while they were off fighting, so that when they returned, they could be assured that the integrity of that property was maintained to the best ability of the appointed trustee.

While the hardworking men and women of our state and local governments may not be “fighting,” they are soldiering on to protect our homes and neighborhoods, educate our children, put out fires, administer driving tests, and make our towns, cities, counties and states work.

During their careers, trustees and fiduciaries of public pension funds across the nation are entrusted with their retirement money to ensure the integrity of that “property”—their retirement accounts. Why on earth would these politicians ever make a decision that was not for the specific benefit of the beneficiary?

In 1830, Justice Samuel Putnam of the Massachusetts Supreme Court gave us, in Harvard College vs. Amory, the “Prudent Man Rule,” a standard still enshrined in US law today of how trustees must act. His words, that a trustee must always consider “the probable income as well as the probable safety of the capital to be invested” has become the standard of care required of all fiduciaries.

Nowhere does Putnam say, “and his or her personal political agenda,” or “his or her personal beliefs.” Why then do politicians continue to try and violate what ERISA law applies to all those managing corporate or union pension plans, where the law clearly states, the “duty of fiduciaries (is) to act solely in the interests of the participants and beneficiaries of an employee benefit plan.”

Maybe it is time to take away fiduciary responsibility from our state and local pension managers and the politicians responsible for them, and subject them all to the same ERISA law that corporate and union managers must abide by. Corporate pension plans always outperform pubic pension plans. Interesting, isn’t it?

If we don’t change the system, we will continue to get dumb and intellectually corrupt politicians making political decisions on investments rather than acting “solely in the interests of the participants and beneficiaries.”

I have been a dedicated public servant for more than 25 years. From 1995-1997, I served as Connecticut’s state treasurer, where I was the sole fiduciary of the $15 billion retirement fund for state employees and teachers, and turned the pension fund around from the worst sta…

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