The Morning After…

Perhaps the biggest irony of the elections is that, after all is said and done, we're essentially ending up back where we were on both ends of Pennsylvania Avenue: Obama in the White House; Harry Reid and more than 50 Democrats and Independents trying to find a few votes from the other side of the aisle in the Senate; and the House in the hands of a slightly diminished Republican majority. 

In terms of legislation that will directly affect investment advisory firms—such as the Bachus SRO legislation that failed to move this year—a split in control of the U.S. Congress may be the best prescription for avoiding extreme legislation and fostering more intelligent discussions about potential legislation. Don't get me wrong—there is always the chance for ill-advised legislation to move forward if some scandal occurs. But absent that type of scenario, the cards that have been dealt should favor a more subdued environment for potentially game-breaking developments on Capitol Hill. Ultimately, the Senate will still be the key in deciding what legislation, if any, will move to the president's desk.

The most telling bellwether of what these elections mean may be how—or perhaps whether—the Congress and White House deal with the rapidly approaching fiscal cliff.  Most investment people I talk with (and most of them tend to be Republican) would favor a "grand bargain" that deals with essential adjustments that need to be made in Social Security, Medicare and other entitlement programs; seeks to reduce other federal spending; and, yes, includes some type of additional tax revenue. These are the biggest issues that are restraining our economy from the robust rebound that many economists feel is poised to occur.  

Given the results of the election, it seems to me that all of our political leaders should understand that our country continues to have deep political divisions. Compromises will not be easy, but trying to bridge the gap is the only responsible course of action. I believe the American public will reward leaders who are willing to recognize the necessity of finding solutions, who are willing to tell the truth, and who will reach across the great political divide to discuss potential options.      

And, while I'm up here on my high horse (at midnight on election night), don't forget that you and I have to bear responsibility for engaging with our elected representatives and other governmental officials.  Considering its size—more than 10,000 businesses that employ more than 750,000 people and advise more than 23 million individual and institutional clients—the investment advisory profession has not done a good job of educating and informing our elected and nonelected policymakers about who we are, what we do, and how their decisions affect our business. It may sound corny, but we need to take steps to join together to make a difference on issues that affect our profession—not by being spectators, but by rolling up our sleeves and making our collective voice heard.

As always, I welcome your views and perspectives.