How Financial Advisors Can Protect Themselves in a Compliance-Driven Brokerage World

Avoiding Termination

Advisors at big firms find themselves in a zero-tolerance environment where infractions that once garnered a slap on the wrist now may be considered grounds for termination. In this new world order, much has changed for financial advisors who practice under the umbrellas of the big brokerages. Shifts in ownership, compensation and management have many advisors at these firms acknowledging that the business is vastly different than it was “way back when” or even just a few years ago. Yet perhaps the biggest change comes in the form of a significantly more hyper-vigilant compliance culture—where a zero-tolerance policy prevails, leaving advisors vulnerable in ways like never before. Historically, the more revenue an advisor generated for his firm, the more insulated he was from possible termination: The worst he might have expected would have been a word of warning from management. But today it seems that the opposite is true—that is, the bigger and more high-profile the advisor, the more vulnerable he might be and the more likely his firm may look to make an example of him. Surely, terminations for sales practice violations or straight-up malfeasance are valid and appropriate. Yet, what we are seeing now is a spate of dismissals that are driven by incidents which are non-client related and far from malfeasance. Things like:
  • Non-disclosure of outside business activity—such as board positions held or other businesses engaged in.
  • HR issues—including inappropriate conversations or arguments with colleagues or sales associates.
  • Expense report violations—for example, submitting non-approved expenses for reimbursement.
  • Violation of company policy—such as having an assistant complete corporate training modules on the advisor’s behalf.
  • Personal financial issues—for example, bankruptcies, foreclosures, bad debts or gambling.
  • Inappropriate behavior—like intoxication at a holiday party or engaging in an inter-office relationship.
We’re in no way suggesting that these activities, or any others which may be in breach of a firm’s policies, are acceptable. What we are saying is that advisors need to be aware that how firms are responding to certain activities has changed. So if you find that you may have crossed any of the proverbial lines that your firm has drawn, there are 3 key steps you can take to protect yourself and your business: 1. First and foremost: Don’t be naïve. If you’ve already been called into your manager’s office and told that something you did last week, last month or even last year is in any way “concerning,” do not sit back and assume all is well, even if the manager tells you it is. In today’s world, once you’ve been tagged as someone who has done something wrong, you can assume you have a target on your back and should therefore be intentional in the steps you take to protect yourself. 2. Hire an attorney who specializes in the financial services industry. If you have any sense that you may be on the radar of your firm’s compliance department or that termination is a possibility, now is the time to speak to an attorney. The attorney’s job will be to help you get ahead of “this” and determine if you have reason to be concerned. In some cases, we have seen advisors counseled to proactively resign before they are handed a pink slip. 3. Always have a “Plan B” at the ready. Whether you are in the crosshairs of your firm’s compliance department or not, every advisor should know what their Plan B is—particularly in a landscape where change has become a constant. Knowing where you would go if you were suddenly terminated is important—but keep in mind that if there is any “hair” on your employment status, the options available to you could be very different. Now is the time to develop relationships with recruiters, managers and senior leaders at competitive firms: This will help to ensure you are well-informed and in a proactive state, regardless of the situation. While you can focus on staying fully aware of your firm’s policies and procedures, and making every effort not to violate them, the reality is that as long as you’re an employee of any firm there’s a certain amount of vulnerability that comes with the territory, and as such, you are not in total control of your destiny. So take the time to learn about the landscape and create your own Plan B—before the need arises. Related: Why the Wirehouse World Is Still the Right Place for Many Advisors