An Obamacare equivalent that would do to retirement what has occurred in health care represents a potential “existential” threat to financial advisors, who need to actively lobby lawmakers in their districts.
So said Financial Services Roundtable (FSR) chairman Tim Pawlenty in an address Tuesday to some 5,000 attendees of LPLFocus, the broker-dealer’s annual advisor conference in San Diego this week.
Proposals to have the government assume responsibility for workers’ retirement savings “are now under study at the state level, but could pose an existential threat to the kind of services you’re trying to provide,” said Pawlenty, whose Financial Services Roundtable is a lobbying organization representing the 100 largest integrated financial services companies, including LPL.
A government takeover of private retirement savings accounts was just one scenario Pawlenty, a former Republican governor of Minnesota and presidential candidate, warned advisors of.
Another proposal would eliminate tax preferences for the retirement savings accounts of higher-income Americans.
He also cited the Department of Labor’s fiduciary proposal, which he said could have the perverse effect of making access to financial services less affordable to middle-class Americans.
Pawlenty told the advisor audience that the partisan divide in Washington makes government dysfunctional in a way that was not the case back when Ronald Reagan and Tip O’Neill were “fighting by day and drinking [together] by night.”
Despite their reputations, Reagan as a staunch conservative and O’Neill as a liberal politician of conviction, both men were “pragmatists who got things done,” Pawlenty said.
Today’s gridlock, he said, is the effect of gerrymandered political districts, which assure safe and comfortable general election campaigns that heavily favor the incumbent but, in contrast, volatile primary elections that have incumbents looking nervously at “their left or right flanks.”
Pawlenty pointed to former House Majority Leader Eric Cantor as a recent illustration of this phenomenon.
“Cantor had about a zero chance of losing in the general election until a relatively unknown college professor [Dave Brat] took him out” in an upset primary victory in June.
The fear of ideologically purer candidates in both parties has the effect of limiting interparty cooperation, he said.
Barring a significant change in Congress’ political composition that would be friendlier to financial advisors — and Pawlenty says the deciding contests are within the margin of error and therefore the outcome is uncertain — “things will be legislatively the same till at least 2016,” and that, he said, means that advisors’ fate is heavily influenced by Washington’s regulators.
Scarred by a perception that not enough was done to forestall the financial crisis, “their main perspective is we'd rather overbake the cake than underbake the cake,” Pawlenty said.
He cited as an example the Consumer Financial Protection Bureau, which he described as “well intentioned, seeking to increase transparency; trying to find its way.” But the CFPB came up with new rules on remittances — payments by immigrants sent to their family back in their countries of origin.
The rules, mandated under the Dodd-Frank Act, require more disclosure of fees and exchange rates on remittances and make the firms that processs them responsible for remedying certain "errors." Critics contend that the rules greatly complicate sending remittances, particularly to war-torn areas.
“If you make the rule too tight or difficult you make it impossible to provide that service in a cost-efficient way and end up choking off that service,” he said.
The solution, he said, was for financial advisors to offer a “practitioner’s perspective on what things look like from the customer’s point of view.”
Pawlenty urged conference attendees to join LPL’s political action committee, and for advisors at other broker-dealers to do likewise.
“And give maybe a little money or a lot of money — it makes a real difference.”
Similarly, he urged advisors to give of their time.
“Even a few hours a year — you don’t have to make it your avocation — to share your ideas with members [of Congress] from your district," he said. "It makes a big difference.”
Check out Are We Headed to Mandatory Retirement Savings Accounts? on ThinkAdvisor.