PSSSSST: FOR A HOT COLD-CALL LIST, CHECK CONGRESSIONAL DIRECTORY: DISCLOSURE FORMS SHOW MOST REGULATORS COULD USE HELP IN PLANNING

Many of the federal regulators who oversee financial planners might want to consider consulting with them instead.

Take Securities and Exchange Commission Investment Management Division head Barry Barbash, the lawyer who keeps an eye on mutual funds and registered investment advisers. With a net worth in the range of $1 million, Mr. Barbash has more than 45% of his portfolio in cash and money market funds.

Or most members of the Commodity Futures Trading Commission, who have missed out on the bull market in stocks.

Or especially new SEC member Paul Carey, 35, a former White House aide and son of former New York Gov. Hugh Carey, whose primary assets are a trust interest worth $50,000 to $100,000 in a family home and savings of between $2,000 and $30,000.

Financial planners reviewed the financial disclosure statements of these and other officials and agree that most of them should take lessons in financial planning from SEC Chairman Arthur Levitt Jr. Of course, it does help that Mr. Levitt, 66, uses an investment adviser and has a lot to plan with – a portfolio in the very nice neighborhood of $15 million to $65 million.

In his own defense, Mr. Barbash, 43, says he regularly jokes, “Nobody ought to be following what I do.” He adds that his conservative investment style “reflects the nature of” his job, not a lack of understanding investment principles.

Government ethics rules prohibit officials from being involved in cases where they make decisions, Mr. Barbash says, adding “I haven’t invested in mutual funds in four years,” since joining the SEC.

Born to invest

On the other hand, Mr. Levitt, who has regulatory power over the entire securities industry, has no qualms about investing in mutual funds or anything else.

The portfolio of the former head of the American Stock Exchange includes $1.3 million to $7.8 million in stocks, $16 million to $74 million in mutual funds and $1 million to $7 million in cash.

The disclosure forms require officials only to chec
k wide asset and income ranges, so an exact determination of their net worth is not possible.

Both Mr. Barbash and Chairman Levitt “took a step back” when they took their current jobs, says SEC spokesman Duncan King. “The chairman stopped picking stocks and put his money into mutual funds. Barry was in mutual funds, so he pulled back to CDs.”

The spokesman would not name Mr. Levitt’s investment adviser, saying, “Enough is public in his file.”

That includes the holdings detailed in the accompanying chart.

Before heading the American Exchange, Mr. Levitt was a partner with what is now Cogan Berlind Weill & Levitt, an investment banker, and served as president of the former Shearson Hayden Stone, since folded into Smith Barney.

“Mr. Levitt has a plan and he’s followed it,” concludes Andrew Hudick, a principal of Fee-Only Financial Planning LC in Roanoke, Va. “He’s using large, low-expense mutual funds, including several index funds, for his allocation in certain market sectors.”

Other SEC members are doing OK, but not nearly as well.

Another planner, Susan John, owner of Financial Focus in Wolfeboro, N.H., finds the portfolios of Commissioners Norman Johnson, 67, and Isaac Hunt, 60, “unremarkable.” Their portfolios reflect “things you would expect people in the net worth category of under a million to have, like retirement plans.”

But she finds it noteworthy that “all these individuals … have really low debt …. That’s a really good thing to see.”

Laura Unger, 36, who recently joined the commission after serving as Republican counsel to the Senate Banking Committee, has two mutual funds, Fidelity Puritan and Fidelity New Millennium, worth between $50,000 and $115,000 and a net worth estimated at $300,000 to $400,000.

Roy Komack, president of the differently spelled Komach Management Services Inc. in Natick, Mass., says, “The idea that she’s got mostly equity investments and not a whole lot of bonds is good. Th
at will provide better retirement security than if she had invested in bond funds or money markets.”

Not what it seems?

Mr. Carey is in a different boat.

“How’s this poor fellow going to retire some day?” Mr. Komack asks. “He’s relying on an act of God like the death of his father for retirement security.” But, through Mr. King, the SEC spokesman, Mr. Carey replies that his retirement plan, the thrift savings plan for federal employees, does not have to be reported on the disclosure statement. He would not comment further.

Members of the Commodities Futures Trading Commission are generally more prosperous than Mr. Carey, but advisers don’t think much more of their planning.

Most of the officials are “frightened about the domestic stock market right now,” observes Martin Eby, a principal with Wealth Management Services LLC, a Baltimore investment advisory firm that supervises about $20 million.

With between $1.1 million and $2.8 million in assets, commodity commission Chairman Brooksley Born has only 17% to 19% in growth and small-cap mutual funds while she has 25% to 34% in international funds, Mr. Eby figures. She “certainly missed out on the growth in the domestic market over the last three years.”

Commissioner Barbara Holum is the “exact opposite,” Mr. Eby says. With 12 Merrill Lynch funds as her sole fund investments, he says, “One family of funds can’t be all things to all people.”

Commodity commission member David Spears gets high marks for allocating 70% of his portfolio of between $60,000 and $245,000 in domestic equity funds.

Commissioner John Tull’s portfolio of between $425,000 and $740,000 is poorly diversified, Mr. Eby says, with $281,000 “in a bunch of life insurance policies.”

A spokesman says the commission members have no comment.

Which brings us back to Mr. Barbash, who describes himself as never a wheeler-dealer. Given the constraints of government service, what could he – and the thousands of mid-
level employees like him – do with their holdings?

“It would seem that Mr. Barbash and his wife Karen could benefit from consulting with someone who could help them prepare a comprehensive financial review,” says Mr. Hudick. He suggests moving some of the family’s $330,000 to $850,000 in cash to another sector.

Does Mr. Barbash care about the opportunities he’s missing?

“I viewed it as a cost of holding a job I always wanted,” he says, noting, “We’re all being killed in terms of what we could make on the outside.”