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Who’s looking out for us?

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I got to thinking — dangerous, huh? — about our profession. Many of us investment-oriented folks belong to the FPA, SFSP, FSI and other professional associations, right? But who is looking out for us? Who is really looking out for us? Is there anyone out there? All those associations cost serious money; yet, are they looking out for us? I wonder. 

Who was looking out for us when broker-dealers and FINRA’s predecessor, the NASD, decided our customers were broker-dealer customers, not really our customers? After that, since each BD “owned” its customers, block transfers, allowing us to easily change BDs, were no longer permissible.

What the BDs really did was to make it 10 times harder to change from one BD to another. My view is that the best way for a BD to keep its representatives is to be a good and responsive BD. It’s easy to see who was looking out for BDs, but who was looking out for us? (In a way, BDs reap huge benefits from keeping the income from customers who fall through the cracks — the ones that are missed during a changeover; it seems dishonest to me.)   

Did anyone ask us about onerous and sometimes downright cantankerous paperwork and exploding CE requirements? I don’t think so. Not only do we take online course on top of online course, now BDs make up additional tests for us if we want to sell certain types of investments, even though we are licensed to sell them in the first place.

We sit in front of a computer for a 3.5-hour lesson and test in ethics for FINRA, every three years. It’s not bad to learn this stuff, but 3.5 hours at once is almost cruel punishment. We have BD CE, special CE, insurance CE (for those with insurance licenses), firm CE and more. Besides all that, most of us who are serious about this business spend a lot of time studying to do due diligence for funds, REITs, SMAs and other investment products. Most of us are as honest as each day is long, however it must make government and BDs feel good to have us jump through hoops.  

The truth is this: the kind of hoops we jump through for BDs and FINRA are not going to prevent another Madoff, as they didn’t prevent the one who is in prison currently. They won’t prevent the failure of Lehman Brothers or any investment bank, and they won’t stop a crooked advisor from trying to steal money from his or her investment customers. 

See also: Why a uniform fiduciary standard isn’t the answer

Most of the people in the investment business are hard-working, decent people. The bad apples will always game the system, and a person without morality won’t gain ethics from watching firm or regulatory videos and taking CE tests. There are relatively few bad apples in this business, thankfully. The dishonest investment professionals seem to wind up in trouble. (It used to be that a too-large percentage of them worked in Boca Raton — I don’t know if that is still true, but I always found it to be an amazing thing.) But I promise that all this extra work, expense and CE does nothing to stop the few bad guys and gals in our business. I’m not in favor of no CE, but I am in favor of some sort of limit on the number of things we must do each year. 

And I am in favor of having an association that actually works for us to keep things reasonable. Maybe I’ll start an association that will lobby for advisors — you know, an organization designed to look out for us. 

Have a fantastic week; keep enjoying summer, like I suggested last week!          

For more from Richard Hoe, see:


Charlie White’s dynamic idea



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