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Bad news

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FINRA and its broker-dealer members never seem to report or discuss good news, nor does the SEC. How nice would it be to see a headline like this?


Wouldn’t that look good on the FINRA website?

FINRA and the SEC are regulatory agencies and, therefore, greatly concerned with wrongdoing. There are bad apples in every occupation; even so, my suspicion is that most of us financial advisors are good eggs and do our best for customers.

However, the way we are treated indicates that FINRA and its member broker-dealers assume we are all bad guys and gals. This may be because regulators only deal with the few baddies at the bottom of the barrel. Professional advisors are frisked like criminals when they undergo the triennial firm element examination and generally seem to be treated with suspicion.

The people who are in charge know investing rules. However, they often know little about investing itself. We advisor spend years educating ourselves, earn degrees and designations, and work very hard for our customers, and yet, we get little respect from regulators and sometimes from broker-dealers.

Broker-dealers tend to give the big awards and trips out for production, not for good work. The investment world is skewed. Up until the end, Madoff would have qualified for any broker-dealer’s top production club; indeed, he would have been the top of the top. But where is the recognition for the unsung guy or gal who spends eons of time helping special-needs families? Or the advisor who helps someone economically rebuild from disaster? (I can tell you what happens in the first case: the compliance department says he or she may not be involved with trusts and do the work, but who is better to help special-needs beneficiaries make money last than financial planners?)

Regulators also seem hesitant to bring suit against the top financial CEOs of this country — for example, the ones whose firms engineered or contributed the Great Debacle in 2008. To advisors like me, it often seems that regulators prosecute little guys who can’t afford fantastic attorneys and let the big fish swim free. (After a big fine, the financial whales don’t have to admit wrongdoing.) This is silly, since everyone pretty much gets that the fines are admissions of guilt, even though the companies say otherwise, but those fines pretty much vanish in the sands of time. In other words, it seems, if you are wealthy enough, there may be no personal downside to criminal and unethical behavior.

The bottom line is that regulators need to balance time so that they are exposed to good financial advisors, not just a small percentage of crooks. Those involved in regulation and compliance — instead of only asking what’s wrong — need to ask what’s right.

If lawyers or doctors had to be frisked before professional continuing education, you better believe there would be an outcry and lawsuits to boot. Why is it that we are treated like bad children for doing good work? If the industry wants professionals, it had better learn to treat its members professionally.  

Have a super-fantastic last week of summer and a great Labor Day, and, of course, keep acting professionally.

For more from Richard Hoe, see:

The 7 most important equations for your retirement

Who’s looking out for us? Part three

Who’s looking out for us? Part two


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