From the May 2011 issue of Investment Advisor • Subscribe!

(W)reckoning Day

Advisors have the unique ability to explain macro events to the micro client in a way they can easily understand

Rearranging deck chairs, or fiddling and Rome; pick your hackneyed cliché, but the $38 billion budget “deal” has us trampling dollars to save pennies. The federal budget in 2011 includes $3.82 trillion for spending and a deficit of $1.65 trillion. Quick math finds the ballyhooed reduction to be little more than a rounding error.

It gets worse. Associated Press reported on April 13 that the Congressional Budget Office estimate shows the deal would pare just $352 million from the deficit through Sept. 30, or less than 1% of the $38 billion promised. Lehman never saw write-downs so large.

“The CBO study confirms that the measure trims $38 billion in new spending authority, but says many of the cuts come in slow-spending accounts like water and sewer grants that don’t have an immediate deficit impact,” the wire service reports.

Bill Gross, PIMCOMake no mistake; it was never about money. Despite calls for civility and sanity, and the rise of new organizations like No Labels and the American Centrist Party, it’s all about the ideology. Nowhere was this better illustrated than by a comment from PIMCO's founder Bill Gross, (above), that we’re “out-Greeking the Greeks” at the same time George Soros said the United States could easily handle more debt to get the economy going. It’s about a worldview, and an opinion of government’s role in it.

Advisors have the unique ability to explain macro events to the micro client in a way they can easily understand; heck, it’s how you make your living. Taking some of that sense and sensibility to the political class is now more critical than ever. Not that they’re making it easy for you, however.

Investment Advisor Washington Bureau Chief Melanie Waddell reports that on March 14 the Securities and Exchange Commission’s “pay-to-play” rule went into effect, restricting advisors’ and their employees’ ability to make political contributions to government officials to influence the selection of advisors of public pension funds and other government entities.

“Advisors are crying foul, however, stating that the SEC rule encroaches on their First Amendment rights to free speech, and some securities attorneys maintain that lawsuits could indeed be filed against the SEC arguing this constitutionality issue,” Waddell writes this month in her feature dedicated to the subject.

Leaving the supposedly courageous decisions to those in Washington got us where we are today. Sitting on the “same side of the table” as your client and acting as their advocate is great from an investing and financial planning standpoint, but it’s time to take it outside the office. Let’s show them just how far your notion of client service really extends.

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