Strange Bedfellows
June 1, 2017
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Karen DeMasters
Financial advisor Chad Willardson worked very hard recently to get
elected to a job that had no financial training requirements
whatsoever—treasurer of Corona, Calif.
In that position, he is in charge of investing the city’s $250 million
bond portfolio. His predecessors were in charge of the same fund, but he
says they didn’t have his financial or investment training. They came
into the job cold.
More often than people realize, elected officials in the U.S. have no
financial training when they are put in charge of public budgets and
pension funds on the local, state and national levels. Even when an
official is not directly in charge of a financial department, he or she
is frequently expected to weigh in on the financial consequences of
legislation.
Sometimes financial advisors or those with similar backgrounds decide
to tackle the rigors of campaigning and accept public offices
themselves, but it doesn’t happen enough, say industry people.
Willardson, the founder and president of Pacific Capital, a wealth
management and financial advisory firm, never had any political
ambitions himself. But he wanted to make things better in the community
where he and his family work and live. Leaders in Corona, a growing city
of about 162,000 residents, asked him to run for treasurer in a
nonpartisan election, and he is now starting his first four-year term.
“A lot of cities are in financial trouble and there are many of us with
financial expertise who can make a real difference,” he says. “Managing
the city’s portfolio was like taking on a new client for me, but it is a
very important client. It was easy to fold this in with what I already
do as a business.
“I don’t think we can afford to place our investments in the hands of politicians,” he says.
Willardson is using the same resources for the city that he uses in his
business, and he has brought in a third party analyst to help show the
officials how the city can increase yield and reduce costs on its
investments. “My goal by the end of four years is to show how much we
have improved with our investments,” he says.
The ways advisors get into the public arena differ, but the goal of
effectively influencing public policy so that financial consequences are
taken into consideration is the same for most. Some advisors who have
taken the public servant plunge are battling financial issues on the
state level. Heather Bishoff, co-owner and chief financial officer of
Bishoff Financial Group in Worthington, Ohio, an asset management and
retirement planning firm, started with a seat on the local board of
education when she saw teachers being let go and programs being cut. But
she soon found that school funding is a state issue.
She is now a Democratic member of the Ohio House of Representatives in
her third two-year term facing numerous challenges in a state ranked
fifth worst in the United States for taxes. “It was extremely
intimidating to run for office, but we need more people who are
financially minded to be at the forefront of these issues. There are
public policy issues on expenditures and taxes that affect people on a
day-to-day basis,” she says. “We have to put our money where our mouth
is, so to speak.”
“I’ve had my say, but, despite my pleas, Ohio has raised a lot of
taxes,” she says. “What tends to happen when non-financial people make
decisions about public policy is they trip over a dollar to save a
penny. As financial advisors, we think long term and for taxpayers it
should be the same. I am too passionate about this to see shortsighted
public policy made. As financial advisors, we know you sometimes have to
make investments up front to save money later on.”
As an added bonus, Bishoff says her children love her holding public
office. “They feel special. They know I am good for a peanut butter
sandwich for them, but I can also stand on a mountain with a sword and
let my opinion be known if need be.”
Another bonus is that holding public office can give a financial
advisor added exposure, says Doug Lyons, founder of Douglas J. Lyons
Financial Group, a wealth management firm in Red Bank, N.J. Lyons was
encouraged to run for office in his hometown of Bay Head, N.J., he says,
but commuting to New York City every day left him with little extra
time. After opening his own business in the suburbs, he had more time.
A Republican, he is now in his second three-year term as a Bay Head
councilman in charge of the finance committee. Lyons encourages all
financial advisors to serve in public office as a way of giving back to
the community. Being in public office gives an advisor more attention
but it also means taking the good with the bad, he notes.
“People will unload their complaints about local issues on you at
parties, but as a financial advisor you deal with all kinds of
individuals, so you can bring a unique skill to the table in knowing how
to deal with people,” he says. “Absolutely, I would encourage other
financial advisors to run for office.
“In Bay Head, there were issues in the finance department that needed
to be dealt with and I think I brought a new perspective that would not
have been there without me,” Lyons adds. Since he has been on the
council, he has helped deal with full-time and part-time employee
issues.
Advisors in general often show a high level of engagement in their
communities, some by running for public office, others by taking
different actions, says Blaine Aikin, chairman of the Certified
Financial Planner Board of Standards Inc.’s board of directors.
“Financial advisors are highly engaged in people’s lives and understand
behavior and they know how to bring reality into the picture,” Aikin
says. “Sometimes what we want to do is not realistic: Advisors have to
point this out all the time, so they know how to work with people to
show them what the trade-offs of proposed legislation might be.”
But being in politics can be divisive, and some advisors may not be
comfortable with that. “Many people may not realize a public official
needs to be a fiduciary, just like a financial advisor needs to be one,”
Aikin points out. “They need to act in a way that is best for their
constituents” on decisions about whether to, say, pursue revenue growth
or focus on other goals like land preservation. In this way, they are
acting just as advisors need to act—in the best interests of their
clients, he says.
Many advisors still hesitate to jump into the political arena, adding
more work to what is probably an already busy life and potentially
creating enemies along the way, says Paul H. Auslander, the former
Financial Planning Association president and chair, who has held
leadership positions in the financial community nationally and in
Florida where he works and lives. Auslander is the director of financial
planning at ProVise Management Group LLC, a fee-based financial
planning and investment management firm in Clearwater.
He was selected in 2007 by Florida’s chief financial officer to serve
on the state’s first Financial Literacy Council for a four-year term.
The council, created by the Florida Legislature, was asked to study the
financial issues that affect consumers without basic financial
knowledge. The council made recommendations to the legislature on how to
help consumers increase their knowledge of these issues.
Auslander is known for urging financial advisors to apply their skills
to public policy issues by taking on elected and appointive offices.
“Financial advisors in public offices are needed more now than ever, but
many do not run because of the time-consuming complications of dealing
with their own compliance issues for their firms, or because of a
disdain for the political process,” he says.
“I would like to see them do it because they see it as a noble method
of service, but most are not interested,” he says. “Some cataclysmic
event may spur them to act, but they should not wait until something
drastic happens.”
The U.S. Department of Labor’s fiduciary rule, which requires advisors
who deal with retirement planning to act in the best interests of their
clients, is a perfect example of a law that needed more financial
experts weighing in on it, Auslander says. The rule is now set to go
into effect in June. “The rule was a great idea in concept but then
something went wrong and it is just bad legislation now, which is a
shame,” he says.
The reward for those who accept the challenge of being in public office
is that “you feel like a public piñata,” says Frank Astorino, a
Republican councilman in his third term in North Caldwell, N.J. He heads
the Astorino Financial Group, a wealth management and financial
planning firm in Fairfield, N.J.
