Would you sell an 85-year-old widow an annuity with a long surrender period? You wouldn’t, but some advisors still do, despite the widespread adoption of annuity suitability regulations. Would you set up a scheme to attract new investors with unrealistic rates of return and then pay them off with new-client money? You wouldn’t because you know Ponzi schemes are fraudulent and illegal. But every year, advisors get arrested for such scams.
Would you persuade your clients to repeatedly buy and replace financial products just to generate a new commission? You wouldn’t, because you know your state’s insurance code and FINRA prohibits churning. But that doesn’t stop other advisors from unethically padding their wallets.
Why do advisors keep “going rogue” by hurting their clients, their companies and themselves? The answer is complex. In part, they never really learned right from wrong. They also never learned how to say “no” to the consumption economy. Their thirst for more and more tempts them to bend rules and break laws. Finally, they’re able to fly under the industry’s regulatory compliance radar, which only affects advisors who are already predisposed to acting ethically. Those lacking ethical values simply ignore the rules and “follow the money.”