Imagine bringing $220 billion of capital back to Wisconsin and in-turn creating approximately 1,000 new businesses, 23,500 high-paying financial services careers, boosting commercial property values AND cutting taxes for our state's seniors, while replacing a non-sustainable financial services industry that currently operates and drains $2.2 billion from the Wisconsin economy every year. We could do all of that and more: introducing the
"Invest in Wisconsin" initiative.
With the goal of changing the structure of investments in Wisconsin, the Appleton-based Foundation for a Sustainable Wisconsin has released its second policy initiative:the Invest in Wisconsin™ Program - to create more Wisconsin-domiciled financial services businesses, and to increase the capital managed by them.
As of the end of 2013, there existed more than 23,000 401(k) plans sponsored by companies that already exist in Wisconsin with over 3,600,000 participants. In total, these company-sponsored retirement plans held more than $210 billion worth of capital, nearly all of which is currently sent out-of state to be administered and managed. The six largest banks in the nation now hold 67% of all the assets in the U.S. financial system. Places like New York, New Jersey, Connecticut, Boston, Houston, Chicago, and Denver receive this capital, which is used to employ tens of thousands of investment managers, administrators, attorneys, marketing and advertising staff, wholesalers, etc. It’s also used to pay for office space, housing for employees, printers, IT professionals and a wide array of other support positions. This means that there are thousands of jobs, which are funded by the investments of Wisconsin residents, that are being exported to other states that house larger financial institutions instead of stimulating growth within the state.
Becoming self-sufficient (and sustainable) means that jobs we might currently outsource are brought back to Wisconsin, benefiting our state directly. As such, the Foundation for a Sustainable Wisconsin has outlined a 3-step plan bring financial services institutions, careers, and investment back into the state:
Step 1: The State of Wisconsin would contract with a large private-sector record keeper (such as TIAA-CREF, Fidelity, etc.) for participant record keeping under the condition that the offices and careers be domiciled in the state. Plan administration and design would be done by independent third-party administrators also domiciled in Wisconsin.
Step 2: Step 2: The investment management roles would consist exclusively of licensed Wisconsin-domiciled managers who would create a wide variety of investment options for participants to choose from. The basic structure of each firm would be regulated and legislatively predetermined to ensure the highest level of quality and investor protection: the firms must accept fiduciary responsibility for their investment options, compensation would be capped at a set maximum rate (0.50% of assets under management), and total assets under management would be capped at $500 million per firm.
Step 3: Participant advisors would limited to Wisconsin Registered Investment Advisors (RIAs). These advisors would be capped at a specific asset-under-advisement total of $20 million and advisor fees would also be capped at 0.50% of the participants' assets per year.
With these changes, regulations, and incentives, Wisconsin would be attract to attract hundreds of new firms to the state, and would simultaneously be instituting a more sustainable investment management platform that would support 23,500 direct careers and a total of 47,000 careers through standard multipliers.