Fidelity’s public mindedness begins with its bottom line

With the fall elections still several weeks off, unsuspecting citizens are under constant bombardment. And nobody is safe.

Signs are hammered into lush suburban lawns. Urban billboards get in your face. Online accounts clog up with junk political e-mail. My mailbox has grown thick with urgent fund-raising missives from both sides of the aisle.

Cab rides are mere platforms for radio advertisements. And as for television? Today, a sitcom is something that airs between blocks of political ads.

All of which explains why I was disappointed when I opened my most recent monthly statement from Fidelity Investments. And it wasn’t just because of the spotty performance of my holdings.

On page two, under the heading “additional information about your investment report,” there appeared a political advertisement of sorts. The text noted that the Senate was considering a law that would increase contribution limits for retirement savings plans. “We strongly endorse it.” And since the legislation, which “overwhelmingly passed ” the House in July, is now before the Senate, Fidelity urged me to call the congressional switchboard and to log on to fidelity.com to send letters to senators.

I logged on to the website to learn more. The legislation in question — HR 1102 — has several provisions. It would boost the maximum allowable IRA contribution to $5,000 a year, from $2,000, index IRA contributions to inflation, boost 401(k) limits up to $15,000 and allow older workers to make extra “catch-up” contributions to retirement plans.

On the site, Fidelity appealed to my social conscience. “By acting today, you can make a difference in helping working Americans save for a financially secure retirement.”

A mouse click sent me to the Securities Industry Association’s website and a four-paragraph form letter. The missive made me seem very knowledgeable. “A recent study released by the Consumer Federation of America found that 56% of American households will not accumulate enough resources to maintain their standard of living,” it said. All I had to do was fill out some personal information, and the learned letter would automatically be zapped to Sens. Moynihan and Schumer.

What’s wrong this picture? A lot.

HR 1102 might be good for investors and for Fidelity customers. But above all it would be good for Fidelity Investments. For it would in effect allow consumers to purchase its products with an assist from Uncle Sam.

But for a company to back a piece of legislation isn’t a neutral stance. Every dollar in tax cuts for those who can afford to stow away retirement savings means one less dollar for Medicare, Social Security or deficit reduction.

To be sure, HR 1102 has widespread support. It passed July 19 by a vote of 401-25 and counted some 200 co-sponsors, ranging from ultraliberal Jerrold Nadler of New York to ultraconservative Steve Largent of Oklahoma.

But not every issue is as popular or as bipartisan. Cutting the capital gains tax would undoubtedly be a positive for Fidelity and its customers. But in the past, the issue has been one over which Republicans and Democrats were bitterly divided. The same holds for the various proposals to put Social Security funds in the stock market. Thus far, Fidelity has been mum on both these issues.

Or take the estate tax. Legislation passed by the Republican Congress — and vetoed by President Clinton — would have gradually phased it out. Such a measure could prove a double-edged sword for asset managers.

On the one hand, it would likely increase the total pool of investible assets. On the other hand, it might obviate the need for trusts and other instruments that allow those with loads of cash to skirt the estate tax. And that would be bad for business. So far, Fidelity has yet to urge its customers to lobby on the estate tax legislation.

And it shouldn’t. Financial services companies like Fidelity already have plenty of influence. They have powerful trade associations and keep lobbyists on their payrolls, and their executives testify at Congressional hearings.

Most important, their executives make substantial campaign contributions. In the past year and a half, Fidelity head honcho Ned Johnson has given $20,000 to the National Republican Senatorial Committee as well as $1,000 to George W. Bush. Mr. Johnson’s daughter and heir apparent, Abigail Johnson, has doled out about $12,000 in campaign lucre over the past several years. Her beneficiaries include Sens. John McCain, Edward Kennedy and William Roth — whose name appears on a popular retirement savings vehicle. In addition, literally hundreds of Fidelity employees have donated to dozens of candidates.

There’s nothing wrong with individuals using their own cash to aid candidates or causes that they like. But executives should be more circumspect when trying to enlist their legions of customers in campaigns, especially when the issue in question might benefit a particular industry at the expense of the rest of the nation.

Did you ever notice that large American companies become public minded only when they can benefit from it? The companies who care most about the digital divide are those whose products can fill it. The oil and gas industry hates taxes — except those to build roads.

Fidelity’s actions strike me in much the same way. A law that boosts retirement savings may indeed have widespread social benefits. But it seems to me there are more pressing issues.

I’ve been getting statements from Fidelity for about four years now and have yet to see language urging me to call my congressman to support more spending for college scholarships, or to encourage recycling, or to ban soft money — all initiatives that have widespread popular support and would have social benefits equal to or greater than indexing IRA contribution limits to inflation.

Maybe that will come on next month’s statement.

Daniel Gross is the author of “Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance” (PublicAffairs). He writes monthly on business and politics for InvestmentNews.

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