An Advisor's Greatest Fear

Is compliance your greatest fear or your greatest friend?

Maybe that depends on how you do business.

Take a look at some excerpts from recent articles:


“SEC Chairman Mary Jo White last month said she believed her agency also should write fiduciary requirements for brokers, a broader rule that would apply whenever they recommend financial products to clients, not just retirement advice. Ms. White said the agency was only at the beginning stages of a ‘long process’.” Source

“The Obama administration is set to propose new rules requiring brokers who recommend retirement-account investments to put their clients’ interests ahead of personal gain, according to people familiar with the matter.” Source

And now for some recent headlines:

“Regulators offer best practices for serving seniors.” Source

“FINRA looks to streamline communication rules for brokers.” Source

It’s going to be a long process so wouldn’t you rather be ahead of the curve than behind it when it comes to putting the best interests of your clients first?


One of my advisor clients told me that he was done with accepting compliance nightmares as clients, no matter how much money they have. This advisor made a conscious decision to stop using situational risk profiles and adapt an objective system.

“Many of my clients envision themselves as big risk takers and will check the box for aggressive in the risk profile. There are many other factors that we discuss with the client to determine the type of portfolio we create for them; and many times that portfolio is more conservative. But when their portfolio produces average returns, they become upset and threaten leaving our firm. Then we need to have the risk tolerance conversation all over again and justify why we are in a less aggressive portfolio,” says the advisor.

The advisor made a pro-active decision to use Financial DNA as a condition of doing business with his firm. Yes, it takes a little time and effort to complete, but we don’t work with clients who won’t do it. Now I can clearly see from a client’s report that if their propensity to take chances score is 73% and their risk tolerance is 50%, I will know up front that I will need to manage the emotions of the client during volatile markets. And, I will have a specific strategy that is customized to the client’s unique personality.

Why would an advisor change the way he does business? He knows that 93.6% of the financial planning process is the behavioral management of the client Source: Question of Financial Advisors, Meir Statman, 2000 so he can objectively uncover all the risks associated with a client: financial, investment and personality. And, now he has a documented methodology that supports putting his client’s best interests first.

Don’t wait for legislation to tell you how to manage your client’s emotions. Become a behaviorally smart advisor and help your client’s stay committed to you and their financial plan.