If you ever meet Jim Christy, you can talk to him about almost anything. Just don't call him a "former lobbyist." This former head of government relations at defense contractor TRW, who also spent a year as head of corporate/government relations for the pharmaceutical and biotechnology trade association PhRMA, is quick to object to the term, which many Washington lobbyists consider a pejorative.
But one-time industry liaison or not, this advisor at Northwest Financial Federal Credit Union in Herndon, Va., is quick to say his work in the nation's capital trying to articulate the wishes of his corporate employers has proven to be of great help in his work today with his investment clients. "There are lots of ways having worked in corporate/government relations in Washington helps with my work as an investment advisor," he says. "For one thing, when you're doing that kind of work in Washington, you have to learn how to assess what are real threats to your company's or industry's interests, and what are just salvos from the back benches."
By way of example, he cites an Obama administration proposal to place caps or limits on the size of qualified retirement plan investment balances-an idea that put the fear of God into many clients and their advisors. He also cites repeated proposals in Congress or from the White House to eliminate the mortgage interest tax deduction. He says, "in my view neither of these proposals has a chance of passage."
Similarly, Christy scoffs at the fear some have that Social Security will go bust, paying out only 75% of benefits to retirees sometime around 2036. "I tell my clients that if you're 55 or older, you don't have to worry about any diminution of your benefits. No advisor should say to any client that they should take Social Security benefits at 62 because the program might not be there later when they try to retire at 66 or 70." But he adds, "If you're under 55, you have to worry that your Social Security benefits might be eroded."
On the other hand, Christy says his experience working the halls of Congress and the White House convinced him early that tax rates would be rising on the highest earners, and deductions for higher earners would be cut, as happened early this year. "That had been a threat for a while, and it was going to happen," he says. "If you recall, even [former House Majority Leader John] Boehner said he was prepared to propose higher taxes for incomes of $1 million or more, and in a compromise it was everyone earning over $400,000 ($450,000 for married couples) who went from 35% to 39.5%."
Christy says his experience in Washington (he also worked on the staff of the House Energy and Commerce Committee and as a young man was on the White House staff during the administration of President Ronald Reagan) helps him to provide his clients with good advice, particularly when it comes to government policies that may have an impact on them, their savings plans and their retirements.
What his past career has not done is help him to build his client base. "When TRW was bought by Northrop Grumman in 2002, and after a year with PhRMA, I found myself out of work, and with six kids in school, I had to be responsible for my own affairs, so I took all six CFP courses." A friend invited him over to Northwest Financial, where he says he initially thought he could work as the firm's corporate rep, but the friend said, "Why don't you try advising?" So he did. (LPL Financial is the TPM for Northwest.)
From a lifestyle point of view, it was a refreshing change," he says. "I get to build a business that is much more to my strengths-working with people you can assist and help with their goals, rather than with people you cannot control, and who don't want to be controlled, like the people in Congress."
From the outset, Christy decided he was not going to go into Washington to try and corral business from his acquaintances on the Hill, but would instead build a client base in the suburban communities surrounding his new institutional home.
He has a few clients from the House committee he worked on, but no members of Congress or other staffers. "I rarely go downtown," he says. "Essentially I started from scratch. There was one advisor who had left, and there were some accounts, but the good ones had all been picked over by the time I came, and I got the debris."
Of the 6% of his current book that he started out with, he says, looking back today, that "I would have been better off without that. Those accounts haven't really developed into anything." Instead, the growth has been from federal employees living in the area, "and they're retiring from the government all the time." That, he says, is his niche: "Retired or near-to-retirement federal employees."
He says his prior work in Washington only comes up indirectly in his work with those clients. "Sometimes people ask," he says. "And based on what a person does or did for the government, it helps me to better understand them, which has helped."
The bulk of his book, which is more than $200 million in assets under management, has come to him through referrals. While he and another advisor alternate monthly in addressing a group of federal government retirees, which generates some business for both of them, he says client referrals are the main source of his new clients.
Most of those clients have investable assets in the $250,000 to $750,000 range. "You won't see many federal employees who have $1 or $2 million to invest," he says. "They have great pensions, but not that much in savings. What they need are things like estate help, advice on taking care of elderly parents, paying for kids' college and so on."
In terms of his approach to client investments, he says, "We're more tactical than we used to be. We do a core-and-satellite approach. We put maybe 60% to 70% of assets in mutual funds and ETFs, and then 30% to 40% in things like commodities, commercial real estate, emerging markets or something along those lines."
For that purpose he likes alternative mutual funds that include "all kinds of stuff," explaining, "you can get alternative exposure that way without having to buy six or seven different things. One fund can have 10 to 12 alternative investments within it."
Maybe it's having all those federal employees as clients, or just being a few hours' drive from his old stomping ground, but Christy still can't get Washington off his mind. "The government system is broken," he says. "Congressional districts have been so gerrymandered that only a handful of seats are at risk in any two-year election cycle, which makes it very difficult to turn things around. Look at [Sen. Mitch] McConnell. He's the leader of the Republicans in the Senate, and is very respected, and yet he's in a serious battle in Kentucky within his own party. What state in the country would want the most powerful, or second most powerful man in the Senate to lose his seat?"
As for Washington's role in his new profession, he takes a dim view of attempts to regulate the ethics of the advisory profession. "The government cannot regulate the ethics of advisors," he scoffs. "There needs to be a harmonized way of getting advisors' interests aligned with the interests of investors. The government needs to be careful not to make it so prescriptive that it prices advisory services out of the reach of ordinary investors."
He remains hopeful that reform will come. "Believe it or not," he says, "there are members of Congress who are looking for people with wisdom, not just people with handouts. Look at the Syrian crisis. Members of Congress will weigh public sentiment back home, but they're also thinking seriously about the problem and looking for people with ideas and answers."
Name: James Christy
Bank: Northwest Financial Federal Credit Union
Location: Herndon, Va.
TPM: LPL Financial
2012 production: $1.5 million
2011 production: $1.3 million
2012 AUM: $181 million
2011 AUM: $150 million