Social Security has long been considered to be the “third rail” of American politics. Like touching the electrified third rail of a train track, any politician who suggested reforming Social Security would get fried by voters afraid of having their benefits reduced.

In the financial services industry, talking about politics itself with clients has become a sort of third rail for portfolio managers, bankers, accountants, and other financial advisors. In today’s hyper-polarized political climate, many financial professionals have decided that the risk of offending a client’s political sensibilities is simply too great. So many financial advisors avoid the topic altogether in their newsletters, blogs, white papers, and other client communications.

Should You Talk About Politics With Your Clients?

There’s no doubt that talking about politics in one-on-one meetings or written client communications has its risks. But not talking about major political events that are affecting financial markets – such as the 2016 U.S. presidential election or Britain’s vote to leave the European Union – can be just as dangerous.

Clients count on their financial advisors to make sense of complicated issues and navigate turbulent markets. Times of volatility and uncertainty are when skilled portfolio managers, bankers, accountants, and other advisors can prove their value. These professionals shouldn’t shy away from talking to their clients about political issues that are influencing financial markets and the economy.

The challenge is: How do you do this in a way that doesn’t offend your clients’ political sensibilities?

Tips for Talking to Clients About Politics

If you decide that it is important to talk to your clients about the upcoming elections or other political issues, here are a few guidelines to help you avoid turning the topic into a third rail:  

  • Stick to what is relevant to your services: If you are a portfolio manager, your clients hire you to manage risk and create alpha. If you are an investment banker, your clients hire you to raise capital and maximize the value of their businesses. If you are an accountant, your clients hire you to minimize tax liabilities and manage cash flow. When you are talking to clients about political issues, only talk about things that are relevant to the expertise that you were hired to provide.

    Your clients want and need to hear from you about how political events are shaping market dynamics. For example, if you are a banker, you should help clients understand how the Brexit vote is affecting the availability of debt and equity capital in Europe and around the world. If you are in private wealth management, you should explain to clients how Hillary Clinton’s and Donald Trump’s proposed estate tax policies, if enacted, would affect your clients’ wealth transfer strategies. But straying into political topics that are beyond the scope of your professional duties is where you can really get yourself into trouble.
  • Stick to the facts: Notice that the job descriptions for portfolio managers, bankers, and accountants listed above do not include making public policy recommendations. When you are talking about political issues, focus on what you think will happen, not what you think should happen. There’s a big difference.

    Your clients count on you for objective advice, and you have a responsibility to provide a fair, even-minded assessment of the political realities. You don’t necessarily have to completely neuter your communications of your political perspective. (In fact, it’s very difficult to be completely unbiased.) But if you need to editorialize, be clear about where the facts end and where your opinions start.
  • Show both sides of the story: Equal-time rules don’t apply to your newsletter, but you should act like they do. One of the best ways to be objective in your client communications is to make sure you are presenting both sides of an issue. Even if you don’t agree with the validity of the other side, you should still present the rationale of that line of thinking.

    Your clients will respect your analysis more if they see that you fully understand all aspects of an issue. For example, if you are a portfolio manager and you are discussing how the Obama administration’s proposed rules for limiting corporate inversions will affect corporate profitability, talk about the issue as holistically as possible. Talk about both the near-term and long-term cash flow implications for companies with unrepatriated foreign income. Talk about how the lost income will affect companies’ investment strategies, and also talk about how the gained tax revenue will affect federal budgetary decisions.

  • Don’t fan the flames: If the 2016 U.S. presidential election cycle has proven anything, it is that hyperbolic headlines and columns about doomsday scenarios help sell newspapers and magazines. As a financial advisor, a big part of your job is to keep a level head in times of turbulence and not get caught up in herd mentality. Focusing on the longer-time impact and historical context of political issues in your client communications is a great way to show that you are thinking about the bigger picture and not being swayed by the 24-hour news cycle.

    During the 2016 U.S. presidential primaries, a lot of ink was spilled about how the surprising success of Trump and Bernie Sanders represented a wave of populist sentiment that would drastically alter the U.S. political landscape. As a financial advisor, this would have been a good opportunity to remind your clients that populism is, in fact, not unprecedented in the United States. Over the past two centuries, various forms of anti-elitism have shaped policy on both the left and the right, fueling the campaigns of politicians such as Andrew Jackson and William Jennings Bryan in the 1800s and Huey Long, Joseph McCarthy, and George Wallace in the 1900s.
  • Don’t assume things you don’t know: One fear that all financial professionals have when it comes to thought leadership and other client communications is the fear of being wrong. This applies whether the topic has anything to do with politics or not. The fear is that by making a forward-looking analysis and distributing it via e-mail or social media, that analysis could turn out to be wrong, and it will erode your credibility. This is certainly a valid fear, and there are things you can do to mitigate this risk.

    First, when analyzing the financial impact of apolitical issue, don’t talk in terms of certainty. Identify the variables that could sway the outcome in the other direction. For example, if you are talking about how Brexit will affect European economic growth, it’s fine to offer a prediction, but you also need to talk about yet-to-be-determined variables that could have a major impact on the European economy, such as the terms and timing of the United Kingdom’s exit from the European Union and whether any other countries on the continent will hold exit referendums.

    Second, don’t fall victim to herd mentality. Just because an idea is being widely discussed in the media and on social media, don’t assume that it is true. Warren Buffett and other successful investors have made a lot of money by not following the herd, so you shouldn’t be afraid to be contrarian when it comes to your analysis of political events.

Financial professionals approach talking politics with clients with a high degree of trepidation – and with good reason. But sharing your analysis of how political events will shape financial markets doesn’t need to be a third rail. By following the guidelines above in your writing and other communications, you can showcase your expertise without alienating your clients.


About the Author

Scott_Headshot2.1.jpgScott Wentworth is the founder and head writer of Wentworth Financial CommunicationsIn high school he ran unsuccessfully for president of his sophomore class. Afterwards, his mom told him, “Don’t worry about losing the election. It’s just a popularity contest.” That did not make Scott feel any better.