Advisers reluctant to take plunge into political life

Concerns about compliance, clients keep many on sidelines

Feb 23, 2014 @ 12:01 am

By Mark Schoeff Jr.

Like a lot of Americans, financial advisers complain about ineffective representation in Washington, but relatively few are willing to join the fray and run for elective office.

Despite calls by industry leaders to get more politically involved, most advisers are unwilling to make the commitment of time, money and energy that running for office demands.

Paul Auslander, past president of the Financial Planning Association, has been urging planners for years in speeches and newspaper OpEd pages to run for political office. Last week, he acknowledged that he hasn't had much success.

“There's not a charge to the gate,” Mr. Auslander said. “Advisers are not naturally predisposed to being politicians.”

(For more from Mr. Auslander, see his blog post published Monday.)

When InvestmentNews went looking for advisers running for political office this year, it found three: two candidates in congressional primaries and one vying for re-election to a state legislature.

All three say that their understanding of financial principles and how the economy works gives them a mindset that is needed on Capitol Hill and in the statehouse.

“My background and skills are in sync with the most pressing challenges the country faces,” said Brian Ellis, owner of Brooktree Capital Management and a challenger to incumbent Rep. Justin Amash in the GOP primary in the third district of Michigan.

In the second district of Arkansas, J. French Hill is running in the Republican primary to replace retiring Rep. Tim Griffin.

“We have a lot of people in Congress who don't have a handle on markets, on fiscal and monetary policy,” said Mr. Hill, chief executive and chairman of Delta Trust and Banking Corp.


On the state level, the topics are just as important, said Heather Bishoff, co-owner of The Bishoff Financial Group and a freshman Democrat in the Ohio House of Representatives.

Helping clients think through their budget and investments has a parallel for governments, she said.

“It's a sincere, focused attitude to help preserve, protect and accumulate wealth for an individual, family or small business — and we need to have that same focus at the state and federal level as we propose legislation,” Ms. Bishoff said.

Of course, there are drawbacks and obstacles to life in public office.

Chief among them is the risk of offending clients with one's political principles. Advisers also risk losing clients during campaigns due to attack ads by their opposition.

“To some degree, the success of your practice depends on your clients liking you,” Mr. Auslander said. “If you have political beliefs contrary to theirs, it might not promote that.”

Advisers also face obstacles in running for office that other Americans don't. Perhaps the biggest hurdle lies with their employers as many would-be candidates have to get approval first.

Two former advisers at Morgan Stanley brought recent cases against the firm — one through a Financial Industry Regulatory Authority Inc. arbitration, another in a California court — for firing them for seeking and serving in public office.

In both instances, the firm said that the advisers violated rules on outside business activities.

Morgan Stanley didn't respond to a request for comment.

It isn't just the restrictions on outside work that cause problems, said Peter Mafteiu, principal at Sound Compliance Services.

Compliance questions also crop up in such matters as fundraising, and insider knowledge and influence while in office.

“There are compliance issues all over the place here,” Mr. Mafteiu said.

A Wells Fargo & Co. adviser contemplating a run in the Republican primary in North Carolina's Sixth Congressional District, Don Webb, declined to be interviewed because he hadn't received approval from the firm to run.

He did, however, put up a website that included a statement criticizing the leadership of House Speaker John Boehner, R-Ohio.

Wells Fargo spokesman Anthony Mattera said that the company doesn't prohibit advisers from running for office but does set parameters.

“We do encourage community activity, including political activity, as long as it's on the employee's own time and out of their own pocket,” said Mr. Mattera, who declined to comment about Mr. Webb.

The firm doesn't allow employees to serve in an office such as treasurer or on a pension board where they would handle funds or make decisions about investment and banking providers.

“It is a bit of a balancing act,” Mr. Mattera said.

Commonwealth Financial Network also allows advisers to run for office, but they have to get written approval from the firm and can't hold an office in which they could influence firm business.

“There are things that an adviser needs to think about that your typical public person doesn't have to think about, and it relates to conflicts,” said Paul Tolley, chief compliance officer at Commonwealth.

Raymond James Financial Inc. doesn't prohibit advisers from running for office, but the campaign must be approved as an outside business activity by the adviser's branch manager and compliance officer or regional supervisor, according to spokeswoman Anthea Penrose.

Campaign contributions are given extra scrutiny, she said.

Mr. Hill said that he went through more than a month of compliance review with the board of his firm before he launched his race “to make sure the campaign could be run in the right manner from a compliance and governance point of view for our institution.”

Another obstacle for advisers is how much time their political activities could take away from clients.

“A lot of campaigning is done during the noon hour, after work and on weekends,” Mr. Hill said.

Mr. Ellis said that he has added to his firm's support staff while he runs for Congress and is making sure to stay in touch with his clients.

At her firm, Ms. Bishoff oversees business operations while her husband interacts with clients. The division of labor was first instituted when she became a mother, which was prior to her first run for office in 2012.

“That gave me the flexibility to do what we needed to do to raise our children,” Ms. Bishoff said.

Even though he is involved in a high-profile primary against a vocal leader of the Tea Party faction of the Republican Party, Mr. Ellis said that his firm hasn't suffered client attrition.

“My clients have been very loyal to me,” Mr. Ellis said.

Many of Mr. Hill's clients already knew of his political leanings when they first started working with him because he previously had been a Republican Senate aide and a Treasury official in the administration of President George H.W. Bush.


For Ms. Bishoff, a foray into politics has started conversations with clients in both parties.

“It has absolutely activated some clients, and they feel more comfortable sharing their concerns and political beliefs,” she said.

Ms. Bishoff also has enjoyed talking to voters while knocking on 12,000 doors in her district.

“It's very authentic and it keeps it real for you,” she said.

A drawback of running for office is political attacks. Groups supporting Mr. Amash have run television ads questioning Mr. Ellis' credentials as a fiscal conservative. He fires back that Mr. Amash, in toeing the Tea Party line, has voted against bills that would have cut the federal deficit.

Mr. Ellis said that his conservatism is in line with fellow Michiganders, and his ability to sense the political mood depends on his adviser skills.

“You develop a knack for discerning what is important to clients and you try to meet those needs as best you know how,” Mr. Ellis said.

Before jumping into politics, advisers must take the temperature of the people closest to them, Mr. Hill said.

“Make sure your family and your business associates share your passionate convictions,” he said.

Mr. Ellis hopes other advisers will enter the political arena.

“It's hard to cross that initial threshold. but once you do, it's invigorating,” he said.


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