After an interview at our annual conference in June, INSITE 2016, I realized the enormity of the mountain the financial services industry must climb to regain the public’s trust.
During the interview, my guest speaker reported that she relies on several key advisors to help manage her wealth. Even so, neither her own experience nor that of her trusted advisors guaranteed protection from one of the unscrupulous predators who swim in our seas. Though the government ultimately meted out punishment to “Bambi” for the damage she did to my interviewee and others, her confidence in our industry took a major hit.
Episodes like this are far too common, and these crimes are not perpetrated by brokers alone. Many of us are familiar with the nefarious activities of some “fiduciary advisors,” including past presidents of NAPFA and holders of CFP designations. Crooks are crooks. Unfortunately, some people exploit their positions of trust whether they proclaim themselves to be fiduciary advisors, clergy or counsellors.
The actions of these few hurt more than just their victims. The most obvious side-effect of the abuse of power in this profession has been reputational damage with the investing public, followed by an increase in government regulation and the attendant compliance costs. The recent Department of Labor rule on conflicts of interest provides a great example of the government intervening when the industry wouldn’t clean up its own act.
Perhaps the most profound and long-lasting effect that malfeasance has had on our business relates to our current talent shortage. We can’t seem to attract new people to a career in our industry. Those of us in this business know its rewards. We help others. We are paid well. We are intellectually stimulated. We have opportunities for personal and professional growth.
But those on the outside see our pinstripes as prison uniforms, not as tailored suits. They see people motivated by money, not by a desire to educate others. And when prospects do explore employment with advisory firms and broker-dealers, they are instructed to focus on obtaining new business as their first priority. Employees who lack a passion for revenue generation get capped in their career growth while others express dismay that helping clients is not the chief objective. It appears we are trying to sell the reward, not the dream.
As a profession, we expend a lot of calories denigrating the business models of others in the field. Broker-dealers dismiss RIAs as failed salespeople. RIAs define registered reps as product pushers. Insurance agents scorn others for not paying enough attention to risk and protection. While it is natural to view our work as superior, lay people have trouble understanding the different designations. Frankly, many within our own business further confuse the models by using the terms “producer” and “advisor” to describe people who work with clients. It’s not hard to see why regulators and consumers fear our business and get wound up about potential conflicts of interest. To return to my interviewee, even she shared that she was unable to differentiate between a broker, a money manager and an advisor.
As a result, no matter what nomenclature we give our job, the actions of dishonest people who are indicted, fined, censored or sued splash on all of us. Talented young people looking for a promising career feel too wary to hitch their shiny new carts to a damaged old horse.
The reputational vulnerability of our industry made me wonder about other professions and how they address their own talent shortages. This investigation was difficult because the circumstances vary so greatly. Law schools and medical schools still produce hundreds of certified professionals but there aren’t enough jobs for them. The accounting profession went through a period of high turnover so the industry worked on creating better career growth opportunities for the people it attracts. Meanwhile, members of Congress continue to descend into the abyss wholly indifferent as to how the public views them.