Financial services providers who are disenchanted with their broker-dealers or who simply want to re-invent themselves as decidedly pro-investor advisors have a great opportunity today to re-make themselves into Progressive Financial Advisors.
Progressive Financial Advisors (PFA) would be a distinct genre of financial professionals and would provide much more than those adopting the fiduciary standard. They would be obvious advocates of progressive political positions that are now resonating with millions of Americans that have totally by-passed the political and corporate establishment.
Evidence of this is seen in the raw popularity of both Sen. Bernie Sanders and Donald Trump. For different reasons, both have tapped into the unsettled, seething attitudes of many Americans who have either not enjoyed financial security or been forced to serve as silent witnesses to the mismanagement of America’s political and military systems.
So while these are often considered purely political problems, financial advisors know both also have definite financial consequences that affect their clients everyday.
This is why some financial advisors should consider becoming FPA who put today’s political issues directly into their financial practices and advice.
Not only will this align PFA with like-minded clients, but it will also differentiate certain practices from other advisors who just offer advice, with or without adopting the fiduciary standard, without ever addressing the macro-political-economic events that shape all current financial plans for 99% of all Americans.
PFA who re-brand their practices will have distinct advantages in re-framing how their advice is presented, client relations, marketing, public relations, networking, and positive community relations. Their product mix may or may not change, but their entire business model would be re-oriented towards advancing a progressive political agenda.
Much More than the Fiduciary Standard
Becoming a PFA is much more than just adopting the fiduciary standard. While the fiduciary standard is important, the decade-long battle against well-entrenched and self-serving financial services lobbyists becomes irrelevant when advisors become PFA. The reason: By definition PFA would elevate their clients’ interests above their own as evidenced by their promotion of progressive political and financial issues.
And what are these issues?
They come from the leading progressive candidate himself and (as shown below), have been evident for decades, but never elevated to public discussion at the national level.
PFA who adopt some or all of these issues would have much more to discuss with their clients and as many ways to implement them into any financial plan as before.
And for advisors who say that politics and providing financial advice do not mix, I would say that injecting politics into the advisory business has existed for decades, as evidenced by the huge lobbying money financial services and insurance companies have been directing into anti-investor laws and regulations for decades. Just to take a recent example, who do you think is spending billions to fund the current anti-fiduciary campaign?
And even worse, all of that money originally came from unsuspecting customers whose fees and commissions were converted via some Rube Goldberg accounting into lobbying donations that were perversely used against them. Let the CEO of any major financial services company explain this action to naïve customers.
Injecting an outside philosophy into providing investment advice has existed for decades among the religious right. There are many Christian-oriented financial advisory firms which promote investment advice aligned with biblical scripture and teachings. Niche marketing is also an accepted marketing strategy. Financial advisors who have cultivated a following among gays have existed for decades.
Similarly, the progressive political movement has fostered many financial endeavors, such as co-ops, building and loan societies (the institution in the film, “It’s A Wonderful Life” was a building and loan society), fraternal lending associations, and social investing.
So while the PFA suggestion is admittedly a novel and undeveloped idea, it may also be an idea who time has come; a time for a few intrepid independents to think out of the box.
So for those few, here are the Progressive ideas to promote in a PFA practice. Each can be built into a module as part of a larger presentation and as a way to lead into a product or strategy discussion.
Note: All of the following talking point political issues come from the upcoming book, The Essential Bernie Sanders and His Vision for America by Jonathan Tasini (Chelsea Green Publishing, September 2015.)
- Stop corporations from using offshore tax havens to avoid U.S. taxes. Each and every year, the United States loses an estimated $100 billion in tax revenues due to offshore tax abuses by the wealthy and large corporations. The situation has become so absurd that one five-story office building in the Cayman Islands is now the “home” to more than 18,000 corporations. The wealthy and large corporations should not be allowed to avoid paying taxes by setting up tax shelters in Panama, the Cayman Islands, Bermuda, the Bahamas or other tax haven countries. The first bill that Sanders introduced in the Senate (the Corporate Tax Dodging Prevention Act) would raise more than $580 billion over the next decade by eliminating the most egregious corporate offshore tax haven abuses.
- Establish a Robin Hood tax on Wall Street speculators. Both the economic crisis and the deficit crisis are a direct result of the greed and recklessness on Wall Street. Creating a speculation fee of just 0.03% on the sale of credit default swaps, derivatives, options, futures, and large amounts of stock would reduce gambling on Wall Street, encourage the financial sector to invest in the job-creating productive economy, and reduce the deficit by $352 billion over 10 years, according to the Joint Committee on Taxation.
- End tax breaks and subsidies for big oil, gas and coal companies. If we ended tax breaks and subsidies for big oil, gas, and coal companies, we could reduce the deficit by more than $113 billion over the next ten years. The five largest oil companies in the United States have made over $1 trillion in profits over the past decade. ExxonMobil is now the most profitable corporation in the world. Large, profitable fossil fuel companies do not need a tax break.
- Establish a Progressive Estate Tax. If we established a progressive estate tax on inherited wealth of more than $3.5 million, we could raise more than $300 billion over 10 years. Sanders introduced the Responsible Estate Tax Act that would reduce the deficit in a fair way while ensuring that 99.7% of Americans would never pay a penny in estate taxes.
- Tax capital gains and dividends the same as work. Taxing capital gains and dividends the same way that we tax work would raise more than $500 billion over the next decade. Warren Buffett has often said that he pays a lower effective tax rate than his secretary. The reason for this is that the wealthy obtain most of their income from capital gains and dividends, which is taxed at a much lower rate than work. Right now, the top marginal income tax for working is 39.6%, but the top tax rate on corporate dividends and capital gains is only 23.9%.
- Repeal all of the 2001 and 2003 Bush tax breaks for the top two percent. In January, Congress finally repealed the Bush tax breaks for the top one percent—households making more than $450,000 a year. But the Bush tax breaks have been continued for the top two percent—households with incomes between $250,000 and $450,000 a year. Repealing the Bush tax breaks for all of the top two percent would reduce the deficit by about $400 billion over the next decade. After President Clinton increased taxes on the top two percent, the economy added over 22 million jobs. After President Bush reduced taxes for the rich, the economy lost over 600,000 private sector jobs.
- Eliminate the cap on taxable income that goes into the Social Security Trust Fund. If we are serious about making sure that Social Security can pay all of the benefits owed to every eligible American for the next 50 to 75 years, we don’t do that by cutting benefits, we do that by scrapping the cap on taxable income so that a millionaire and a billionaire pay the same percentage of their income into Social Security as someone making $40,000 or $50,000 a year. Right now, someone who earns $113,700 a year pays the same amount of money in Social Security taxes as a billionaire. This makes no sense. Applying the Social Security payroll tax on income above $250,000 would ensure that Social Security remains solvent for the next 50 years. This plan would only impact the wealthiest 1.3% of wage earners; 98.7% of wage earners in the United States would not see their taxes go up by one dime.
- Establish a currency manipulation fee on China and other countries. As almost everyone knows, China is manipulating its currency, giving it an unfair trade advantage over the United States and destroying decent paying manufacturing jobs in the process. If we imposed a currency manipulation fee on China and other currency manipulators, the Economic Policy Institute has estimated that we could raise $500 billion over 10 years and create one million jobs in the process.
- Reduce unnecessary and wasteful spending at the Pentagon, which now consumes over half of our discretionary budget. Much of the huge spending at the Pentagon is devoted to spending money on Cold War weapons programs to fight a Soviet Union that no longer exists. Lawrence Korb, an Assistant Secretary of Defense under Ronald Reagan, has estimated that we could achieve significant savings of around $100 billion a year at the Pentagon while still ensuring that the United States has the strongest and most powerful military in the world.
- Require Medicare to negotiate for lower prescription drug prices with the pharmaceutical industry. Requiring Medicare to negotiate drug prices, similarly to what the VA currently does, would save more than $240 billion over 10 years.