Several months ago, I took my wife’s car out on an errand and noticed the front driver side panel protruding out at the seam. I didn’t notice any dents or scratches so I simply pressed the panel back in place. Investigating further, taking a walk around the front of the car and then to the passenger side, I saw scratches and a large dent.
It turned out that our teenage daughter had driven into a mailbox as she swerved the car off the road reaching down to the floor to grab a CD to play. There was no mention of the incident until we brought it up, as is so often the case with teenagers, who are at a phase of life where rational thought and responsibility are in short supply.
The incident reminded me of the early 90s when I was brokering at Prudential Securities. Our branch had five new advisors at the time, and as can be expected, rookie behavior predictably reared its head. One advisor was immediately fired when he executed an unauthorized trade resulting in a customer complaint. It was uncomfortably common to see advisors tracing client signatures on paperwork the clients neglected to sign. Like our daughter, this is a stage where a short leash and close scrutiny are essential in order to protect the firm as well as protecting advisors from themselves.
As parents, our radar is on full alert for our daughter at this stage of her life as she dabbles with adulthood. As she grows into her 20s and 30s, makes her own life and settles into being a responsible adult, our need as parents to be hypervigilant will wane (at least I hope so). So should it be with compliance departments when dealing with advisors who are responsible and settled into their practice.
Unfortunately, compliance departments often treat well-established advisors with good compliance records like teenagers. When experienced advisors are treated as if they were newly licensed, it not only burns relationship bridges, but also can be unsettling enough to drive them to change broker-dealer. Here are categories of destructive compliance behavior we’ve seen as repeating patterns:
French Law: Guilty Until Proven Innocent
When a customer submits a complaint, you would hope that your broker-dealer would fight for you unless an egregious act has been committed. However, for some compliance departments, standard practice is to treat the advisor as if they are guilty until proven innocent. One advisor shared a story of heirs to a client’s estate submitting two complaints over the sale of universal life policies. The advisor had financial plans to back the investments, so he felt confident he had done nothing wrong. The advisor ended up leaving the firm before the arbitration date due to being treated as if he were a criminal. The compliance department assumed the worst of the advisor, siding with the heirs in their complaint stance. Later, at the new firm, the arbitration hearing completed and the advisor’s UL policies were found to be appropriate investments, so the two complaints were dismissed.
Politics and Religion Don’t Belong in the Workplace
Compliance and broker-dealer staff are best served by being neutral on the topics of politics and religion, or avoiding them in discussion in any context. We’ve witnessed both sides of the political debate offended by back-office voicing of their political or religious convictions. One advisor who headed a local Tea Party chapter was suing his firm because he believed they had terminated him for his political stances, while a female advisor expressed her desire for a broker-dealer that was less “Bible Belt” and more progressive because her current firm made her feel somewhat like an outsider due to her sexual orientation.
On the religious front, since 2010, we’ve noticed an increasing pattern of Christian advisors leaving their broker-dealer because they feel like outcasts. One such case shared a phone conversation he had with two compliance staffers. One of the staffers expressed with disdain how he didn’t share his values, meaning his being Christian. The compliance person was demeaning and condescending to the advisor, so much so that the other compliance person, who was mostly silent during the call, called the advisor back to apologize for his colleague’s behavior. However, the damage was done and the advisor decided to leave.
Catering to a Lowest Common Denominator Culture