Is Santa Claus a Fiduciary?
Christmas is for family, friends and reflection — spiritual and personal. Here’s an idea for investment advisers (IAs) to ponder. Is Santa Claus a fiduciary? Is a fiduciary like Santa Claus?
A Christmas movie favorite is the 1947 film, Miracle on 34th Street. This is the story of New York’s Macy’s department store hiring a Santa Claus, Kris Kringle. Kringle causes problems by aligning with the children he speaks to. He violates Macy’s policy because he will not push Macy’s toys on children.
Instead, Kringle asks children what they want for Christmas. If Macy’s doesn’t have the toy, he tells the parents the toy can be found at a competitor – such as Gimbles. Parents love Kringle for putting their child first — and not just selling a Macy’s toy. Macy’s CEO makes Kringle’s practice Macys policy. The media love it. Kringle puts children first, ahead of Macy’s sales.
Kringle adds to his woes by insisting he is the Santa Claus. Kringle ends up in court having to “prove” it. He does. The U.S. Postal Service recognizes Kris Kringle as Santa. The judge declares Kringle the Santa Claus. All is well for children.
Miracle is an endearing tale about the Christmas icon that captures the spirit of fiduciary. Kris Kringle’s unconditional loyalty, honesty and transparency speak loudly.
Kringle’s spirit recalls Justice Benjamin Cardozo’s words, when he wrote in 1928 about fiduciary duty as “Something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor most sensitive, is then the standard of behavior.”
Justice Cardozo’s expression of loyalty endures. In 2005 his opinion had been cited in more than a thousand opinions. Justice Cardozo’s Opinion in ‘Meinhard v. Salmon’ Continues to Reverberate
Cardozo’s words are poetic. Attorney James W. Watkins explains how they are actionable:
“RIAs are fiduciaries by law, required to always act in the best interest of their clients.” This means, “Fiduciaries are held to an extremely high standard”, with duties of loyalty, putting clients first, disclosing all important facts, keeping costs low, and managing accounts with care.
Achieving a high standard and excellence is an extraordinary feat and a cause for pride in a competitive and merit-based world. Who can forget the outstanding athletes at last Summers’ Olympics? In the arena of professional standards, honesty is the gold medal.
What do consumers think? The Gallup Poll measures consumer views the “honesty and ethical standards” of occupations. 2023 data show that nurses, engineers and vets are three top with 78%, 65% and 60% rankings for high honesty and ethical standards. Meanwhile, stockbrokers, car salespeople and members of Congress are among the lowest ranked five fields at 12%, 8% and 6%.
Nurses have been first for 22 years. Why? An advocacy group for nursing says one it is honesty. “Honesty is one of the primary traits of nurses. They are honest in their words, delivery of care, and actions. … They do not want to mislead patients—and want the patients to know the facts.” (I’m partial. Over the past 18 months I supported my best girl in two cancer operations [the cancer is gone] in two hospitals and with many nurses. Nurses were heroes and deserve admiration.)
Fiduciary advice deserves reverence. By definition acting as a fiduciary is hard. It’s supposed to be. Yet, curiously, the SEC doesn’t say so. Instead, the SEC either ignores or minimizes what fiduciary means. Instead, the much lower broker sales standard is branded “best interest” and takes center stage.
This much lower broker sales standard is mischievous. It is also harmful because it let’s brokers say they meet a standard like fiduciary advisers. This is not true. 2023 research from state regulators says that that brokers under this new standard still act a lot like salespeople.
The SEC also does not explain how the highest legal standard and broker sales standard differ.
It does not explain BD and IA different business purposes, roles and practices. Instead, the SEC claims BDs and IAs are similar. Many expert investors and advisors seem to agree, but the public does not. The public is skeptical (not confused) and continues to move assets to IAs.
Fiduciary spirit and duties thrive in the hearts and practices of thousands of IA reps. Consumers should be thankful. Against the odds, fiduciary IAs have persevered and are rightly proud to have adopted this “extremely high standard” as their North Star to serve clients.
Is Santa Claus a fiduciary? Fiduciaries are on call every day, like nurses. Miracle on 34th Street is a modern fairy tale. Kris Kringle demonstrates fiduciary loyalty, honesty and transparency at an extremely high standard. This is what real fiduciaries do.
