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Perilous paths: the temptations of a financial advisor

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Pressure No. 1 is living beyond your means. You go for the big house, pricey toys and exotic vacations. You wind up with a huge mortgage and a mountain of credit card debt. You start churning client holdings in order to preserve your lifestyle.

What can happen? Clients complain to regulators. Companies red flag you. Clients sue you. You develop a reputation as an unethical and possibly criminal advisor.

How do you avoid the trap? Don’t chase the big lifestyle. Live within or slightly below your means. Keep your life in balance. Don’t get overly focused on money and material goods.

Pressure No. 2 is running with the wrong crowd. You begin working with product companies that cut compliance corners. They believe in run, gun and score.

What can happen? You lose your ethical focus. You start selling investments that are unsuitable for your clients. Your state insurance commissioner issues a warning. You get sloppy with your securities paperwork and get fined by the NASD. You lose your membership in industry organizations and groups.

How do you avoid the trap? Screen your partners not only for their products and support, but also for their commitment to professional ethics and compliance. If they don’t measure up, get new partners.

Pressure No. 3 is growing too fast. You started out as a solo practitioner. But in the last several years, you’ve added so many new clients you decided to hire three new employees.

What can happen? Your overhead soars. Your revenue doesn’t. Trapped like a gerbil on a treadmill, you begin recommending speculative investments with big commissions. Clients complain. Your state securities division audits you and decides to issue sanctions.

How do you avoid the trap? Manage your growth so you never have to recommend an unsuitable investment because you need the revenue.

Pressure No. 4 is getting comfortable. You entered the financial services business because you wanted to help people. You used to love the work, but now it’s getting a bit old. Clients keep asking the same questions. Carriers are a pain. Continuing education is a bore.

What can happen? Rather than find a new career, you just hunker down until retirement. Your edge slowly rusts. Many of your best clients notice – and take their business elsewhere. How do you avoid the trap? Keep learning about new products or planning techniques. Get involved with a professional trade association, ideally in a leadership position. Network extensively with others in the business. Get active in nonbusiness pursuits that stoke your energy and creativity. If you can’t stay excited, find something else to do.

The point is this: ethical lapses are more likely to happen when advisors make bad life decisions. Don’t let this happen to you. Here’s how:

  • Keep your life in balance.
  • Don’t hang with a bad crowd.
  • Manage your business growth.
  • Keep your professional edge sharp.

Do all this and your path through financial services should be profitable and enjoyable – and free of nasty falls.


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