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401k Plan Sponsors, Star Trek and Fiduciary Duty

401k Plan Sponsors, <em>Star Trek</em> and Fiduciary Duty
May 14
00:08 2013

Much has been said about the inability of ordinary people – whether they are 401k plan sponsors or investors – to fully embrace the concept of “fiduciary standard” and why it’s so important. Some opponents of the idea have Star_Trek_300capitalized on this lack of understanding, even going so far as to call it a “marketing gimmick” – this despite several centuries of case law that has created a solid legal definition for the term. Yet, we see classic examples of someone exercising a fiduciary duty every day. They may be mothers, fathers, teachers, athletes and even ships’ captains.

We can see no better illustrations than some of the most beloved characters residing in our favorite dramatic films. As this week features the opening of Star Trek Into Darkness, J.J. Abrams second installment of his reboot of TV’s most famous sci-fi series, it makes sense to explore how these 23rd century characters embody the principle of the fiduciary standard.

Simply put, the fiduciary standard means always putting someone else’s interests ahead of your own. In the original (1960’s) TV shows, nearly every major character had at least one script where he would sacrifice themselves for the good of their fellow crew members. The most famous occurs in the award winning episode “City on the Edge of Forever,” when Captain Kirk permits his true love (played by a pre-Dynasty Joan Collins) to die in order to save life as we know it. In setting aside his own feelings and needs, he acted to protect interests of everyone else (including you and me, since this was a time travel piece set during the Great Depression).

But the height of this display of fiduciary duty, and one perhaps more familiar to the average reader, takes place in the movie Star Trek II: The Wrath of Khan, claimed by no less than Roger Ebert as the best movie in the entire franchise (yes, even Abrams spectacular first effort). At the climax of the film, Spock must expose himself to what would turn out to be a fatal dose of radiation in order to save the ship. As he lay dying in the containment cell, the Vulcan justifies his actions by repeating a line he’s said earlier in the movie (and which Kirk finishes in this scene):

The needs of the many outweigh the needs of the few.

If Kirk and Spock were investment advisers who abided by the fiduciary standard, that line could form their firm’s motto. It states, very simply, what it means to answer to the call of fiduciary duty. In the case of advisers, we could better clarify this statement by substituting the word “clients” for “many” and the word “firm” for “few.” This maxim would then read:

The needs of the clients outweigh the needs of the firm.

But it doesn’t stop there. No, for men like Spock and Kirk, words are meaningless if not matched by actions. They would not hesitate to commit themselves to acts of selflessness. And, best, they wouldn’t behave this way just to win awards, get new business or righteously stake out some higher moral ground. No, as Spock would tell you, they would work this way simply because it is, well, logical. One would almost see that mechanical mind of his setting up a series of rules that would govern their conduct. On the  USS Enterprise, these rules might look like this:

  • Rule #1: If the Federation is in danger, then sacrifice self if it will save the Federation.
  • Rule #2: If ship is in danger, then sacrifice self if it will save ship.
  • Rule #3: If friends are in danger, then sacrifice self if it will save friends.

Kirk, less interested in rules and more interested in the bottom-line, might simplify Spock’s rules this to: I will always sacrifice myself if it will save my friends, my ship or the Federation.

Similarly, the two officers (well, Spock at least) may well create these rules for their intergalactic financial services firm:

  • Rule #1: Studies show investment products paying commissions generally underperform those that do not; hence, we will sacrifice potential revenue and only place clients in no-load investment products.
  • Rule #2: Studies show investment products paying 12b-1 fees generally underperform those that do not; hence, we will sacrifice potential revenue and only place clients in investment products that do not pay 12b-1 fees.
  • Rule #3: Studies show investment products paying revenue sharing fees generally underperform those that do not; hence, I will sacrifice potential revenue and only place clients’ investment products that do not pay revenue sharing fees.

Again, Kirk would probably simplify this to say: As a fiduciary, I promise to always put my clients’ interests first and never engage in any form of self-dealing transaction.

There you have it. A nice, neatly packaged, easy to understand, easy to measure operational definition of what fiduciary duty is, does and means.

Editor’s Note: Those interested in Chris Carosa’s review of the new movie Start Trek Into Darkness can read it here:  Star Trek Into Darkness Review: Man Enough to Admit the Truth. It’s a great place to leave your favorite Star Trek comment. Of course, please leave your fiduciary comments on this page.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

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5 Comments

  1. Bones
    Bones May 14, 14:40

    How do you explain “The Search for Spock?”

  2. J M Brown
    J M Brown May 14, 14:50

    As a life long trekkie, I loved this analysis. Thank you!

  3. Christopher Carosa, CTFA
    Christopher Carosa, CTFA Author May 14, 15:04

    Bones:
    I explain “The Search for Spock” as Leonard Nimoy coming to the realization he shouldn’t look a gift horse in the mouth. The movie does have the merit of ridding the universe of David Markus, who was not credible as Kirk’s son. If there really was a son of Kirk, he would have been played as Chris Pine plays the role of Kirk – a rebel who never forgave his father for leaving him.

  4. Nevin
    Nevin May 15, 10:29

    Personally, considering his libido, I always figured Kirk saw Edith Keeler’s untimely demise as in HIS best interest(s)… after all, sooner or later she was going to kill HIM…

    p.s. you should have closed with “It’s only logical.”

  5. Christopher Carosa, CTFA
    Christopher Carosa, CTFA Author May 15, 10:45

    Nevin: LOL – and you’re absolutely right about the ending. I should have also tried to position the comment “fascinating” in there somewhere, too. Oh well, there’s always the next sequel.

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