More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
This issue marks the 20th year of our annual Advisor Hall of Fame. A lot of very distinguished financial advisors have passed through these pages. In reading their profiles, they always seem deserving of the honor.
While we may be touched by their stories, it is perhaps even more valuable to learn from them. I believe that there is something unique going on with Hall of Fame advisors that is epitomized in a quote from one of this year’s winners, Freeman Welch of Wells Fargo Advisors in Long Beach, Calif. Says Welch: “When my phone rings, I know it’s someone I like and someone who likes me. I trust them and they trust me. Maybe I have all their assets and maybe I don’t — but it’s a great relationship.”
Our Merrill Lynch honoree, Jeff Erdman, echoes the same idea: “All of those families are incredibly important to me. One of them is my sixth grade teacher. I’d never give them away. I want to make sure they’re totally taken care of. We don’t tell someone you’re too small for us or we’re too important for you.”
What all our honorees exude and all top advisors share is the notion that there are ties that bind advisor and client, that the relationship exists on a profound level that goes beyond purely self-interest. This should actually surprise us — it is not conventional business thinking.
The sociologist Ferdinand Tonnies wrote, about a century ago, about two levels of human association, which he termed “Gemeinschaft” (community) and “Gesellschaft” (society). A true community — a family, for example — exists where a common sense of responsibility has a stronger pull on its members than self-interest. In contrast, a society engenders far less loyalty; for example, people come to their jobs more out of self-interest than shared values.
One would think that people seeking professional investment advice come together with their advisors in the broader social marketplace, with each party primarily motivated by self-interest. And yet, though relationships often begin this way, they very often don’t end this way, at least for the best advisors. It is not uncommon to hear advisors speak of how far they’d go to look after their clients or how much they are pained by market-imposed setbacks in their clients’ portfolios. Similarly, many clients brag about and actively promote their advisors to their friends and neighbors. The dentist-patient relationship doesn’t get this deep.
Perhaps the reason is that individual investors have a deep-seated need to get past the barriers to trust when handing responsibility for their hard-earned wealth. And likewise a good advisor appreciates what it means to have that trust. Or as another of this year’s honorees, Mitchell Kauffman of Raymond James in Pasadena, Calif., puts it: “I’m so privileged to be in a business where I can give back, make people’s lives better, and the footnote: make a good living. I feel so fortunate.”
What this year’s Hall of Fame winners have cannot be easily imitated, but it’s something we all can aspire to.