The national office of the AFL-CIO has persuaded money manager Waddell & Reed to join Edward Jones in withdrawing from a lobby group that supports President Bush's proposal to reform Social Security through private accounts, and now the organized labor giant has set its sights on Charles Schwab.
Officials at Overland Park, Kan.-based Waddell & Reed said in a letter to the AFL-CIO that the firm chose not to renew its membership in the Alliance for Worker Retirement Security based on its "history of listening to its clients and being sympathetic and supportive of their issues."
"Please accept our withdrawal as such proof," said Waddell & Reed Executive Vice President and Chief Administrative Officer John Sundeen, Jr.
The Waddell & Reed activity comes on the heels of a similar move by Edward Jones, which last month pulled out of the alliance after having broadcast a 33-minute video outlining the plan for Social Security reform to its six million clients across the country. In the video, the brokerage firm stops short of publicly endorsing a specific solution.
Pressure from the AFL-CIO targets money managers and brokers because Bush's No. 1 solution to an impending Social Security shortfall is to send 4% of worker earnings into private accounts, most likely a mix of stock and bond funds. Opponents of the plan argue that it's too costly, too risky and that the only party to benefit would be Wall Street from the fees it would charge on thousands of accounts.
"Because of its retail network and its political contacts, Edward Jones could be a big winner from privatization," said Bill Patterson, director of the office of investment at the AFL-CIO, in a report from The Kansas City Star.
In addition to private discussions with the investment companies, the AFL-CIO is urging its 13 million members to e-mail their brokers urging them to withdraw from the alliance, The Kansas City Star reveals. AFL-CIO members picketed outside of Edward Jones headquarters in St. Louis and an office in Lincoln, Neb.
Waddell & Reed manages $39 billion in assets and has more than 2,600 financial advisers in offices across the country.
The AFL-CIO controls large amounts of investment money through pension plans and mutual funds and, therefore, as an institutional investor, commands great influence over the financial services industry.
Its next target is San Francisco-based mutual fund supermarket Charles Schwab, AFL-CIO spokesman Steven B. Weingarten told The Kansas City Star.
In related news, The Progress for America Voter Fund, a conservative political advocacy group, has launched a $2 million television advertising campaign supporting the Bush privatization plan. The 60-second commercials will appear during national cable programming for the next three weeks, The Los Angeles Times reports. The fund was a major contributor to Bush's re-election campaign.