Last week was a very interesting one. It consisted of appointments with prospective clients, centers of influence, and a business trip to California. What was particularly interesting was the trip to California and the return flight home.

First let’s talk about the trip to California and the events leading up to it. Last May I spoke at an annual conference for Crystal Ball, a global business unit of Oracle. I gave a presentation on the financial planning tool I developed which uses Crystal Ball’s Monte Carlo simulation engine. Crystal Ball liked my presentation well enough that the firm asked me to conduct a Webinar to demonstrate my planning tool, which I did some five months later. About a month after that I received a phone call from a company that had viewed the Webinar and was interested in hiring me as a consultant to develop a similar tool. So I traveled to the firm’s office in California and we had a four-hour meeting that went well.

I’d like to discuss what happened on the return flight home. I sat next to a woman and we had a long conversation. She shared with me an experience she and her husband had with a particular broker who, though he was instructed to invest their money conservatively, saw their account lose about 75% of its value.

Now she was clear that she didn’t necessarily think the broker did anything malicious (although she wasn’t sure), but it was clear that it affected her in more ways than just financially. Whenever something like this happens, we all lose. The client loses, the advisor loses, and the industry loses. This type of event creates a lasting impression and causes a healthy amount of suspicion in the client’s mind. I understand it. I think it’s completely justified. Whenever rogue or incompetent brokers cause harm to a client, it makes it harder to elicit their trust, and without trust, there’s no relationship. It makes things more difficult for the honest, competent advisor.

Given the current regulatory climate and the probability of increased scrutiny, perhaps we can reduce the number of these occurrences. We’ll never be able to completely eliminate the problem, but if advisors were held to a higher standard, and there was sufficient enforcement, we should be able to reduce it significantly. With fewer advisors and the demand for advisory services increasing, what do you think would happen to our compensation? I think it would certainly help propel our profession forward.