Advisers hope GOP Senate will be good for Washington productivity

Investment advisers optimistic that Republican takeover of the Senate will create a better political atmosphere

Nov 5, 2014 @ 1:37 pm

By Mark Schoeff Jr.

Investment advisers expressed optimism on Wednesday that the Republican takeover of the Senate might make Washington work and lead to legislation that helps them.

In Tuesday's midterm elections, the GOP picked up seven Senate seats to gain control of the chamber, 52-45. Three seats — in Alaska, Virginia and Louisiana — have yet to be decided. In the House, Republicans increased their majority by 14 seats to 243-175, with several races still up in the air.

The GOP took advantage of President Barack Obama's low approval ratings to secure their hold on Capitol Hill. But having each party control a different end of Pennsylvania Avenue doesn't mean that political gridlock has to continue, according to one adviser.

“At least one party has a mandate to move forward,” said Dave Hoyer, owner of Hoyer Financial Services. “Hopefully, this will lead to things getting done rather than this logjam we've had the last couple years. If there's momentum in passing legislation that is helpful to the economy, it's good for all of us.”

The GOP Senate takeover could be good for advisers and their clients, said Paul Auslander, director of financial planning at Provise Management Group.

“Republicans tend to have a better handle on financial issues, at least according to the public,” said Mr. Auslander, director of the Financial Planning Association of Florida. “We'll have a chance to see if they can prove that.”

The Financial Services Institute Inc., which represents independent broker-dealers and financial advisers and was active in supporting candidates from both parties, is cautiously optimistic about a Republican Congress.

“Conventional wisdom would say 'yes,' it would be good” for advisers, said FSI president and chief executive Dale Brown. “We'll see. Our focus is going to continue to be on building relationships on both sides of the aisle.”

Mr. Obama will determine how well the parties get along, according to Mr. Auslander.

“A lot depends on whether the president shows up as a leader or a politician,” he said. “If he shows up as a leader, they'll get things done. If he shows up as a politician, it will be more of the same.”

The day after the election, it's hard to know how things will unfold.

“The political reality that created the environment last night hasn't really changed,” said Jason Rosenstock, a partner at Thorn Run Partners, a Washington consulting firm. “I'm not sure the White House and the new majorities are going to be able to reach a 'Kumbaya' moment.”

Duane Thompson, a senior policy analyst for Fi360, a fiduciary-duty consulting firm, also has low expectations for the next Congress. Bills Republicans back are likely to draw opposition from the White House.

“Notwithstanding political rhetoric about the parties working together for the next two years, you're going to see gridlock and the introduction of an old four-letter word — veto,” Mr. Thompson said. “I don't see a lot happening on the Hill over the next two years that affects advisers. Advisers need to follow what the regulators do, not Congress.”

The new political makeup of Capitol Hill will force interest groups to make new friends and renew old acquaintances. That will be the situation next year for the Investment Adviser Association, as it again pushes for legislation that would allow the Securities and Exchange Commission to charge user fees to advisers to increase the number of exams it conducts.

“It's going to be incumbent on the IAA and its allies to find Republican champions for our user fee bill,” said Neil Simon, IAA director of government relations. “I am confident we can impress upon lawmakers on both sides of the aisle that this is the type of legislation that shows Congress can accomplish important things.”

The House version of the current user fee bill only has one Republican co-sponsor. Getting traction in a Republican-controlled Senate next year could be a challenge because GOP lawmakers might favor a private-sector self-regulatory organization for advisers.

“Republicans tend to be less trusting of government solutions than Democrats are,” said Skip Schweiss, managing director of adviser advocacy at TD Ameritrade Institutional.

Members of both parties are interested in the user fee idea, Mr. Schweiss said.

“We need to work hard to change that into tangible sponsorship for a bill,” he said. “The key to doing that is grass-roots level discussions.”

On the regulatory front, the Labor Department is planning to re-propose a rule in January that would raise investment-advice standards for brokers who advise clients on retirement plans. The original proposal, which was introduced four years ago, drew fierce industry — and bipartisan congressional — opposition.

Micah Hauptman, financial services counsel at the Consumer Federation of America, said that a GOP-controlled Senate should not be able to halt the proposal.

“All indications are that DOL is proceeding with the rule making,” Mr. Hauptman said. “It's up to the Obama administration to carry on as expected [rather than] roll over trying to appease a potentially hostile Congress.”


Do you think the GOP win bodes well for issues important to advisers?

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