The Financial Industry Regulatory Authority is pushing for a rule that would require brokers to disclose recruitment incentives and compensation of $100,000 or more.
The proposal, which is set to go before the Securities and Exchange Commission, has been discussed by the industry for some time. Like other experts, Houston-based recruiter Rick Peterson says the push for disclosure of recruiting deals is “nothing new.”
“Brokers have left in the past,” he said, in an interview with ThinkAdvisor. Some brokers who take over their books of business may “call the clients to say ‘Your broker left for a check from another firm.’ This has been going on for years!”
Disclosure of recruiting deals isn’t and shouldn’t be a problem for financial advisors, the recruiter says. And he offers the following advice on turning the potentially uncomfortable situation into an opportunity.
1. Discuss such issues openly whenever they are questioned by clients.
“Even if a client doesn’t bring it up, advisors should mention it,” said Peterson. This builds trust.
2. Turn questions into dialogue.
Advisors should disclose that they did get a financial incentive to make a move and then ask, “Do you have any concerns with that?”
3. Acknowledge client concerns and broaden the discussion.
Say things like, “You are right, yes. I got a financial boost to move to Firm B. But you know, I was offered a lot more to move to Firm C and even more money to go do Firm D …
“But, I chose Firm B. It’s not about money it’s about what’s right for you and me. As I’ve said to you before, I’ve been miserable due to technology, feelings of hostility at Firm A, etc. The product push with Firm A isn’t good for you or for me. I’ve fought it, and it’s been very intense lately.
“Though I was offered some financial incentives to stay at Firm A, I’ve turned it down to join Firm B, which I believe is the right thing to do for you and for me.
“Again, the point is, it’s not about the upfront money. It’s about what’s best for our interests in the long term.”