Reading the Skies: What a 1967 Meteorology Class and a 1928 Train Platform Teach Plan Fiduciaries
Donald K. Jones, Founder & Partner of Fiduciary Wise, LLC
Back in the fall of 1967, I took an elective college course in meteorology—the science of atmospheric phenomena and weather forecasting. I loved that class, mostly because the weather in our area was fickle, shifting several times a day. Decades later, I see those same lessons framing procedural prudence under ERISA and active retirement plan governance.
On our very first day, the professor shared a story I have never forgotten. Centuries ago, before barometers, radar, or satellites existed, a community would send a lookout up to the highest mountain peak. That person’s entire job was to keep their eyes on the horizon and send smoke signals down to the valley whenever trouble was brewing. Interestingly enough, the professor noted that when they compared those early observations with the technology we had in the late 1960s, our high-tech forecasting was only marginally better.
Then came our syllabus: thirty percent of our final grade depended on getting out of bed before 7:00 AM, checking a few basic instruments around campus, looking up at the sky, and sliding a handwritten weather prediction under his office door.
The lesson was simple: tools are helpful, but nothing replaces getting up early, looking with your own eyes, and using your head.
Fiduciary duty is not an academic, set-it-and-forget-it routine. It is an active, observant discipline. When you oversee other people’s hard-earned money, you cannot hide behind an automated scoring model or assume smooth sailing just because the sun was out yesterday. You have to stand on the peak, look at the horizon, and act on what you see.
1. The Lookout on the Peak: Active Vigilance Over Passive Trust
A fiduciary’s job begins with active observation. Just as our ancestors could not protect their village by sleeping in and hoping the clouds would stay away, a plan committee cannot protect its participants by simply trusting an investment consultant’s annual packet.
Too many retirement committees treat their role like a spectator sport. They look at quarterly reports packed with colorful charts, assume everything is fine, and move on. But procedural prudence under ERISA requires hands-on inquiry. Technology and software can crunch numbers, but they cannot exercise judgment. If you are an ERISA fiduciary, you are that lookout on the mountain. You have to look at the raw numbers, understand what is driving performance, and ask whether the menu of funds you provide actually serves the participants depending on them.
2. The Smell Test: Prudence Demands Timely Investigation
Old-timers have a saying: if it doesn’t look right or smell right, throw it out. In plan governance, when something seems off with an investment option, you do not get to sit on your hands and hope for the best.
Under ERISA, hope is not a legal strategy. Decades of case law make this clear:
“Luck or good fortune is no substitute for a trustee’s duty to inquire.”
— Donovan v. Bierwirth, 680 F.2d 263 (2d Cir. 1982)
“Failure to make any independent investigation and evaluation of a potential plan investment constitutes a breach of fiduciary obligations.”
— Liss v. Smith, 261 F. Supp. 2d 248 (S.D.N.Y. 2003)
When a fund’s performance deteriorates, its fees creep up, or its management team abruptly turns over, a fiduciary cannot say, “Let’s give it another couple of years to see if luck turns in our favor.” The law expects you to investigate immediately and evaluate whether that fund still belongs in the lineup. Ignoring red flags until participants have lost significant savings is a direct breach of duty.
3. Battening Down the Hatches: Preparing for Market Storms
My daughter and her family live in Hawaii. A while back, a Category 5 hurricane was barreling straight toward their island. They did not wait to see if the storm might veer off or lose steam; they boarded up windows, secured emergency water, and prepared for the absolute worst. By the time the hurricane made landfall, it had weakened significantly to a Category 2 and then a Category 1.
Did they overreact? Not at all. They did what any sensible person does when danger is headed their way.
Neither weather forecasters nor retirement plan fiduciaries are expected to be clairvoyant. No court expects a trustee to predict the exact day the stock market will take a dive. But the law does demand that you prepare for storms and err on the side of caution. That means scrutinizing downside risk, avoiding reckless investment strategies, and ensuring participants are not left holding volatile, unvetted funds when markets turn rough.
4. Throwing Hardballs: Demanding Real Loyalty and Real Standards
Anyone working on an ERISA plan should be willing to raise their right hand and swear: “I promise to focus exclusively on the participants and their beneficiaries”.
Yet in far too many committee meetings, the questions thrown at consultants and recordkeepers are gentle softballs. Nobody wants to rock the boat. But fiduciaries are held to what the courts call “the highest standard known to the law” (Donovan v. Bierwirth). If you want to meet that standard, you have to trade the softballs for hardballs:
- Hardball Question 1: How are you actually analyzing risk?
The Department of Labor expects thorough evaluation of fund risk, emphasizing risk-adjusted returns. A consultant’s proprietary “10-point scoring system” or color-coded matrix is not a risk-adjusted return analysis. Do you know the actual Sharpe ratios, Sortino ratios, and downside capture of your funds, or are you just relying on a vendor’s arbitrary checklist?
- Hardball Question 2: Why are we accepting mediocre performance?
If the legal benchmark for an ERISA trustee is the highest standard under the law, why do so many committees allow investment options to linger in the 50th or 75th percentile of their peer groups year after year? Tolerating chronic mediocrity because changing funds takes paperwork is the exact opposite of the highest standard of care.
5. The Lesson from the Train Platform: The Power of Foreseeability
Nearly a century ago, a landmark tort case called Palsgraf v. Long Island Railroad Co. (1928) reshaped the landscape of American law. The case arose when railroad guards tried to help a passenger board a moving train. In the struggle, the passenger dropped a package containing hidden fireworks, which exploded and toppled heavy penny scales at the other end of the platform, injuring Helen Palsgraf.
In his famous majority opinion, Chief Judge Benjamin Cardozo wrote two sentences that echo through courtroom halls to this day:
“The risk reasonably to be perceived defines the duty to be obeyed.”
“Negligence is the absence of care, according to the circumstances.”
While Cardozo didn’t rely heavily on the specific word “foreseeability,” Palsgraf became the foundational bedrock for the doctrine of foreseeability across American jurisprudence. Put in plain English: if a prudent person can look at the facts and see that harm is likely to happen, they have a legal duty to step up and stop it.
In recent years, skillful ERISA litigators have applied this very principle to retirement plans. When plan data shows excessive administrative fees, unexplained underperformance, or poor fund construction, that data is staring the fiduciary right in the face. The resulting loss to workers’ retirement balances is not an unexpected freak accident—it is entirely foreseeable.
Conclusion: Don’t Ignore the Horizon
The ancient lookouts with their smoke signals, my 1967 meteorology professor, and Helen Palsgraf on that New York train platform all point to the very same truth: when the warning signs are there, looking away is never an excuse.
As an ERISA fiduciary, you are not asked to predict the future with magic. But you are required to climb to the peak, examine the instruments, look at the sky, and protect the people who trusted you to keep watch. If the data shows a storm gathering, don’t wait for luck to bail you out. Step up, ask the hard questions, and do your duty.