If money talks inside the nation's capital, then the advisory profession may soon be speaking in a louder voice.
After years of living in the proverbial shadow of big-money lobbying organizations like the American Bankers and the Securities Industry Associations, advisors are poised to exhibit more clout. How? The Financial Planning Association is getting ready to launch a new political-action committee designed to strategically advance the association and the goals of its nearly 30,000 members.
"When you're part of the financial services industry (whose political contributions account for a full 20% of all PAC money political candidates receive), it's a tall order to be competitive and be heard on Capitol Hill, but we feel we need to do this," says Duane Thompson, the FPA's director of government relations.
To get the PAC off the ground, the FPA in April hired an experienced fund-raiser, Suzanne Morgan, the former administrator of the Securities Industry Association's PAC and assistant vice president and director of its grass-roots lobbying activities. "What caught my eye about Suzanne was that she had built one of the biggest PACs in Washington, D.C.," Thompson says.
"She brings energy and experience to helping the FPA build a PAC," says James D. Spellman, the SIA's senior vice president of communications and a longtime associate of Morgan's.
Morgan brings 12 years of PAC and lobbying experience to the position, in addition to hands-on political and campaign experience. Most recently, as deputy campaign manager, she helped steer to victory the House race of Rep. Shelley Moore Capito (R-W.Va.). Capito is a member of the House Banking Committee.
What are the money goals for the FPA's political-action committee? Both Thompson and Morgan say fund-raising and contribution levels still have to be decided. Thompson notes just a $10 contribution from each FPA member would give the association's PAC nearly $300,000. It also would put it on relatively even footing with some of the biggest financial services association PACs in Washington. And perhaps most important, it would allow the FPA to meet some of the many requests for contributions it receives from federal politicians' campaigns. A PAC can contribute up to $5,000 per candidate, but campaign staffers for House members typically ask for $500, and those for senators usually request $1,000. PAC contributions often give lobbyists the opportunity to talk to lawmakers and their staff in more relaxed settings, such as small dinners or receptions.
That kind of access would give Thompson and his staff of three lobbyists the opportunity to educate lawmakers and their staffs on the benefits of financial planning, a task that includes making sure that advisors are not confused with insurance agents, stockbrokers or others.
It also means that FPA lobbyists will have a greater opportunity to steer some of the issues near and dear to many advisors' hearts. FPA priorities include continued pension reform, modifying ERISA so advisors can give advice to 401(k) plans and quashing a proposed Securities and Exchange Commission rule to permanently exempt brokers who offer advice from investment advisor registration and regulation.
Does the FPA really need this kind of access? To press the last policy issue, Thompson sent a letter to every member of the Senate Banking Committee in late June requesting that they use nomination hearings on Harvey Pitt, the Bush administration's choice for SEC chairman, to ask Pitt where he stands on the issue of broker exemption. The exemption "would permit broker-dealers to avoid the higher fiduciary standards of investment advisers to their clients, as well as the comprehensive disclosure of conflicts of interest and other information about the advisory firm required by the Advisers Act," Thompson wrote to lawmakers.
Will he be heard? "There are 535 politicians in Washington and more than 20,000 lobbyists competing to get their ear," Thompson says. "You don't have much time to get your message in front of them. Simply put, a PAC gives planners in Washington, D.C., more clout."
The FPA intends to contribute its money where it will count most-to chairpeople and members of the Banking, Housing and Urban Affairs Committee, as well as the Finance Committee, in the Senate and the Ways and Means and Financial Services committees and Financial Institutions and Consumer Credit Subcommittee in the House. All told, 111 lawmakers sit on these committees.
Thompson's colleagues and advisors who masterminded the creation of the FPA in 1999 agreed with the need to create a PAC. The consensus was to build on the type of PAC that one of the merger partners, the International Association for Financial Planning, had created previously (the Institute of Certified Financial Planners, the second party to the merger, never started a PAC).
The IAFP's PAC was small by almost any standards, donating just $1,500 during the 1999-2000 election cycle and $2,000 from 1997 to 1998. Thompson's goal is to create a PAC with more political and financial clout. "The IAFP had their PAC for some time, and in Washington terms, it was small," Thompson says. "That's not meant to say anything critical about it except the obvious, which is that it takes a lot of time to grow a PAC. You need resources to do that."
Now that the dust has settled on the merger and the government-relations department has grown to four people, "it was time. We saw we could complement our advocacy programs by setting up a PAC," Thompson says.
Morgan not only is taking on fund raising for the FPA's PAC, but she also will lobby on insurance and be charged with building a grass-roots network of advisors who know or have influence with individual politicians. The grass-roots database of "connected" folks she helped create at the SIA numbered some 8,000 people.
"I don't think I can overstate the fact that the most important resource we have is our members," Thompson says. "One or two well-articulated letters to a lawmaker are probably worth more than the maximum $5,000 contribution a PAC can make to their campaign. We have members who have lawmakers as clients or are in their inner circle, and those relationships far overshadow the impact a PAC can have. We really see the PAC as just one tool in our arsenal."
Still, it's an important one. The fact is, in Washington, you can be on the right side of an issue and still lose for lack of clout. "If you want to play with the big boys, you must have money," Thompson says. "This is another tool we want to use to get before the right audience. PACs can open doors in Washington, D.C., a little wider and a little more quickly."
Thompson admits that PACs have a bad name, particularly outside the Washington beltway, but he says the organization and the political contributions it makes will aid financial advisors. So far, FPA members seem receptive. "I'm not taking the time to personally contact my legislators, so it's important that a group that shares my philosophies represents my interests, and that's what the FPA can do," says Phil Johnson, president of Johnson Financial Advisors in Phoenix.
Will he give? "Sure," says Johnson. "If they're trying to raise money for a specific cause, I'll be glad to donate."
Can An Advisor PAC Stack Up?
Here's a look at how much PACs of banking, insurance, mutual fund and securities associations give to federal candidates. Although the FPA has yet to assign a dollar amount to its fund-raising or political-contribution goals, Suzanne Morgan, the FPA's new assistant director of government relations, says the PAC ideally may contribute as much as $300,000 to political candidates per election cycle. That amount could go a long way toward getting advisors noticed on Capitol Hill.
ASSOCIATION 2000 PAC CONTRIBUTION
American Bankers Association $1,183,250
American Council of Life Insurers $ 440,826
Investment Company Institute (mutual fund-industry PAC) $ 493,890
Securities Industry Association $ 182,271