5 ways LGBTQIA+ Financial Professionals can be political now!
Peggy Haslach, CFP?,CLU?
Financial Planning for Women & LGBTQIA+ Doctors | Veterinarians | Attorneys & Business Owners. Together we are Planning For Good!
The 2024 election season is?in full swing. Flag-draped pickup trucks are starting to cruise the neighborhood and the fundraising texts and emails have doubled in the past few weeks. I have had people assume that because I am a financial professional, I have plenty of money to help support their political campaigns. Others assume I can tap my clients for contributions. It does not work that way.
FINRA,?the SEC, and most broker-dealers are very clear about the limitations we can give to political campaigns.?FINRA Rule 4580 states that “covered employees are allowed to donate $350 to candidates for whom they may vote in an election, and $150 to other candidates.” The SEC has Rule 206(4)-5 under the Investment Advisers Act. It prohibits investment advisers from providing investment advisory services “for compensation” to a state or local government entity if the adviser, or a covered associate of the adviser, has made a political contribution to certain state or local government officials in the prior two years. They are also considering other “pay to play” regulations. Cambridge Investment Research, Inc., my Broker Dealer, has combined the two and set up a questionnaire to guide us. They require that we log any political contribution. They also remind us that we need to check state laws.
As a financial planner, I know better than to make any recommendation on political donations to my clients. I felt it was better to say that I have a personal policy of not making direct contributions because I have clients all over the country. My policy was cemented when I was in a compliance meeting, and someone was debating whether buying red baseball caps from a campaign was a political contribution. By the way, purchasing political merch, including red baseball caps, is a political contribution.
I am also very quick to remind my clients that the IRS is very clear that political contributions are not tax deductible. That includes contributions to:
??? A political candidate.
??????? A political party.
???????? A campaign committee.
???????? A newsletter fund.
?????????Advertisements in convention bulletins.
??? ???? Admission to dinners or programs that benefit a political party or political candidate.
What can financial professionals (and anyone else in a similar situation) do instead?
I have some strategies that I use with my clients. These are strategies that I call voting with their dollars.
1. Use charitable donations.
One would think that charitable contributions might dwindle in big election years. I would beg to differ. Some political organizations position themselves to show donors they are supporting local charitable causes. I wrote an article[1] on Donar Advised Funds that have been given to 501(c)(4)s and other organizations that are promoting anti-LGBTQ+ and Anti-trans legislation.
In the article, I recommend that one should give to 501(c)(3) organizations. This is a requirement for Donor Advised Funds. The second thing I recommend is making donations to local charities. This is how it is tied to political campaigns. Many politicians like to show how they give back to the community and build coalitions within the community. When people go to these charitable events and see elected officials, they know that they share the same values and support the same causes. When GenPride held several events around the building of Pride Place[2], there were several local politicians in attendance. I remember thinking that if I lived in Capital Hill, I would vote for those folks. A handful of statewide candidates were in attendance, and it helped me with some of my choices.
2. Collaborate with minority-owned businesses.
I typically work with women and LGBT Business and Practice owners. There are very few women and LGBT who work in the employee benefits and retirement plan space. Let's face it the industry is still very white and very male. In 2021,?80.1%?of the personal financial advisors workforce were white, of which 28.1% were women and 71.9% were men.[3] Yet 42% of all small businesses are women-owned.[4] That means that chances are that when women and LGBT businesses are looking for service providers, they will be referred to someone who does not share their values and will not align with those of their employees. What I have done is partner with women and minority-owned businesses like Leading Retirement Solutions a woman-owned company that offers retirement plans and administration. It also helps that Leading Retirement Solutions is based in Seattle. I have gained clients who specifically want to work with me because my practice is a woman-owned, LGBTQIA+-owned practice. One such client does marketing strategies for progressive causes and has a diverse team of LGBTQIA and non-binary employees.
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3. Help clients invest in their values
ESG, DEI, LGBTQIA, CRT, CSR, and other WOKE acronyms are on the ballot next year and they have been dominating the news cycle for the past few years. Companies who support these acronyms tend to treat the environment well, treat their employees well, and tend to have good governance practices like having diverse representation on their board of directors. Companies that do well also support causes and candidates who align with their values.
When I help my clients invest in their values, I help them screen for ESG (environmental, social, and governance) factors. I help them include companies that support organizations, politicians, and causes that align with their values and exclude those that don’t.
I will use another acronym, the NRA to illustrate. Among the corporations who have given a million dollars or more to the National Rifle Association (NRA) are?Remington Outdoor Company (formerly Freedom Group), Smith & Wesson, BERETTA, Springfield Armory, and Sturm, Ruger & Co. as well as accessories vendors MidwayUSA and Brownells. In turn, the NRA has routinely given money to republican candidates and causes. Most of my clients want to exclude these companies and other companies that sell firearms and support the NRA.
On the flipside, companies like Microsoft, American Express and Oracle donated to Planned Parenthood Federation of America.[5] Planned Parenthood donated to mostly democratic and independent candidates in the 2022 cycle.
Likewise, The Trevor Project’s [6] top tier donors ($1M) include Abercrombie & Fitch Co., AT&T, Google, lululemon, Macy's, and Wizards of the Coast. In turn, The Trevor Project joined other LGBTQIA groups like Equality PAC, Human Rights Campaign, LGBTQ+ Victory Fund Fund, and others to contribute $6.9 million to Democrats and $79.8K to Republicans. The election cycle of 2020 was the biggest spending year ever for LGBTQIA groups.[7] Given the current climate of states passing anti-LGBTQIA and anti-Trans legislation, 2024 promises to set another record.
4. Help clients make political contributions.
Just because I am limited does not mean my clients must be. If I am a true fiduciary, in addition to the duty of loyalty and care, I must pay attention to client directions. If a client has indicated they want to make contributions to political campaigns, it is my job to incorporate that into their financial plan. Of course, I can use some of the tools that we talked about above, but if they want to give directly to the campaign, it is my job to work with them and other professionals on their team like their CPA so that they can. I must also step back and though I can help them identify the funds they will use to make contributions, it is not my place to steer them towards the candidates or causes I want them to support.
5. Get out the VOTE!
The last way I contribute to the process is to vote and encourage others to vote. That is the way we can all make our voices heard. Statistics show that if we have a high turnout, then progressive causes and candidates tend to win. We are even seeing this in states where Republicans seem to have a stronghold. This past year during off-cycle elections, we saw elections cementing reproductive rights and electing candidates who vowed to protect these rights win in states like Kansas, Kentucky, Ohio, and Virginia. Unfortunately, at the same time, we are seeing efforts being made to disenfranchise Black and minority voters. Recently, the 8th Circuit Court of Appeals found that only the U.S. Attorney General can enforce Section 2 of the Voting Rights Act. [8] The ruling will be challenged and will most likely make it to the Supreme Court. In the meantime, we cannot assume that things will go our way next year. ?We know that if we can get a turnout, we should be able to elect candidates and support bills that will protect women’s reproductive rights and protect the rights of LGBTQIA, transgender, and non-binary folks in our country. However, challenges like the one yesterday can confuse and discourage participation. This is when we all need to step up, be allies, and do what we can to support all of our co-conspirators in this effort.
[2] Note: I currently sit on the Board of GenPride and am the Treasurer.
[3] https://datausa.io/profile/soc/personal-financial-advisors#:~:text=In%202021%2C%2080.1%25%20of%20the,%25)%20and%20Asian%20(6.41%25).
[4] https://www.sbc.senate.gov/public/_cache/files/b/9/b99ffab8-b62a-48e1-95ba-b14c5451880b/D779F6653743546214AD6E09EAED29F7.women-entrepreneurship-report.pdf#:~:text=Of%20the%2033.2%20million%20small,employ%20almost%2010%20million%20people.