Janus, Strong pressed at home

With Eliot L. Spitzer breathing down their necks, Strong Capital Management Inc. and Janus Capital Group Inc. are facing some of the toughest national scrutiny in their history.

But as the investigations by the New York attorney general hang uncomfortably in the balance, these companies also have to submit to careful observation closer to home.

Financial advisers in the vicinity of Strong’s headquarters near Milwaukee and Janus’ in Denver express tremendous concern over the alleged wrongdoing.

This seems to be much less the case with independent financial advisers interviewed in Charlotte, N.C., and Columbus, Ohio, where Bank of America Corp. and Bank One Corp. – named in the suit by Mr. Spitzer – respectively, base their investment operations.

no stake involved

Advisers in those areas say they never invested to begin with – financially or emotionally – with the asset management arms of those big banks.

People in Wisconsin’s largest metropolitan area think their regional heritage stands for a higher level of trust than the one mandated by regulatory authorities.

“Milwaukee is a Gemutlichkeit town,” says Blanche Berenzweig, a financial adviser with BSB Financial Services Inc. in Mequon, Wis. She declines to provide her assets under management.

“It means warmth, family and familylike,” Mr. Berenzweig says. “It’s a wholesome family, and [Strong] is one of our own.”

Richard S. Strong, chairman and founder of Strong Capital in Menomonee Falls, Wis., grew up in the Milwaukee area.

But Bruce R. Heling, principal with Heling Associates Inc. in Brookfield, Wis., says he hasn’t detected any sense of betrayal.

“Strong grew up so fast,” says Mr. Heling, who won’t disclose his firm’s assets under management, “They became a national company, and they just happen to be located here, and a lot of people [around Milwaukee] perceive them that way.”

Ms. Berenzweig says it is difficult to perceive Strong as a faceless national company since it enjoys an exclusive five-year contract with Edvest, Wisconsin’s college investment program.

Wisconsin citizens must choose Edvest – and its Strong-laden investment choices – for their 529 plans if they wish to receive a $3,000 deduction against their state taxes. All things being equal, it is the kind of incentive that makes financial advisers recommend Strong funds to parents saving for their children’s college expenses, Ms. Berenzweig says.

The problem is that the recommendation can’t easily be undone.

Funds in 529 plans can be moved out only once a year, and that has put Ms. Berenzweig in a difficult position with clients, she says.

“It’s very easy to pull out of a fund – if for nothing else, for peace of mind,” says the adviser. “When you see Morningstar come out and say, `Sell,’ and you’re not in a position to, it’s really a conundrum.”

Conundrums run amok with financial advisers sifting through more and more tarnished investment options.

But in the Denver area, too, there is an immediacy that is making advisers speak out.

“It’s more localized,” says Judith Shine, a certified financial planner who is a principal with Shine Investment Advisory Services Inc. in Greenwood Village, Colo. “It’s like 9/11: People in New York and New Jersey feel differently.”

Ms. Shine, whose firm has $300 million under management, doesn’t suggest that mutual fund scandals carry the same gravity as the terrorist attacks, but she says that local loyalty to Janus funds has been costly.

“Janus fell out of bed,” she says. “People have had every nickel with them.”

Yet while Ms. Shine says that proximity has added to her concern, Steve Booren, principal with Capital Consulting Inc. in Greenwood Village, Colo., passionately defends Janus.

Mr. Spitzer “is a silver-spoon-fed liberal who is hell-bent on making a deposit on his political account,” says the financial adviser, who has $250 million under management, which includes certain Janus funds. “He broad-brushes Janus into this [wrongdoing] category and says that Janus is a bad company.”

Mr. Booren added assets to the Janus Mercury Fund on Sept. 24, noting that it was up 24%year-to-date, compared with 17% for its peer group.

Columbus is quiet

In Columbus, Ohio, the silence, by comparison, is conspicuous.

“I’ve been surprised how subdued the reaction seems to be,” says Casey Rea, a Columbus-based sole proprietor and certified financial planner who charges by the hour and keeps no assets under management. “A lot of people just don’t put mutual funds together with Bank One.”

C. Andrew Millard, a principal with Main Street Financial Group Inc. of Tryon, N.C., which has $20 million under management, says the naming of Bank of America in the Spitzer lawsuit for its Nations Funds hasn’t touched local advisers.

“[Nations Funds] tend to be sold at Bank of America outlets,” Mr. Millard says. “I don’t see many [such] funds.”

He adds: “I’ve been much more upset with Strong. I’ve been embarrassed by it. I’ve had clients ask me about it. Neither I nor my clients wants to support a company that does something like that.”

Apparently, neither does the state of Wisconsin. Its treasurer, Jack Voight, said last month that he will ask Madison-based Edvest’s board to OK an independent audit of Strong.

Mr. Voight is so disgusted with Strong that he expects the fund company to ante up in advance of a guilty verdict.

“This is a problem created by Strong, and Strong should come forward and pay for the audit,” he told the Associated Press.