What’s the most challenging compliance issue facing advisors today?” asked former SEC Chairman Harvey Pitt at an interactive session of the Cadaret, Grant 2005 National Sales Forum, held in Woodcliff Lake, New Jersey, in early October. The overwhelming answers were “paperwork” and “staying current and understanding the regulations.”
In the aftermath of scandals involving some investment firms, reality now means that the paperwork that advisors must do to keep compliant is much more complex and time consuming than ever before. In addition, advisors have to deal with clients who may be bitter about experiences they’ve had with other brokers or advisors. Referring to the investigations as “pernicious prosecutorial” events driven “by an aspiring governor,” Pitt, founder and CEO of Kalorama Partners, LLC, had some practical advice for advisors.
“The single biggest problem is suitability,” he says. Even Pitt’s aunt, a widow, was put into an inappropriate investment. Needless to say, the advisor who did that is being investigated. “If something you put a client into is not working out, let them know, let them hear from you, not feel that they caught you,” he said.