WealthManagement Magazine

Hey, Financial Advisers!

Did you know you're just simple salespeople? From time to time I encounter firms and brokers who object to our use of the word broker or rep. Others have even wondered if the Registered Representative logo is a bit shopworn. After all, these critics say, the terms registered rep and broker denote the old school, transactional way of doing business, whereas the modern rep is really a financial "adviser."These

Did you know you're just simple salespeople? From time to time I encounter firms and brokers who object to our use of the word broker or rep. Others have even wondered if the Registered Representative logo is a bit shopworn. After all, these critics say, the terms registered rep and broker denote the old school, transactional way of doing business, whereas the modern rep is really a financial "adviser."

These critics have a right to turn up their noses. The transition to advising is painful for old-fashioned brokers, as columnist Matt Oechsli points out. (See "The Inner Game of Selling". And yes, I'm thinking we should change the column's name!) Those who have gone to a consultative approach, who truly advise people, have a right to be proud of the way they work.

So they sometimes protest our choice of words. Fair enough, but in return they get a lecture from me. They hear about the regulatory scheme, the differences between the Advisers Act and the Exchange Act, and between advisers and registered reps. I ask, "Are you an adviser/fiduciary or RR/salesperson?" They answer, "Why, the former, of course!"

That's a nice image to have of yourself, but it's wrong. As an RR, you are not an adviser or a fiduciary. You are a salesperson. And your employer is lobbying to keep you as such.

So my next question to the critics is: Have they protested to the SEC about a proposed rule (File No. S7-25-99, affectionately known as the "Merrill Lynch Rule") that would ensure brokers remain just salespeople? Have they spoken out about rules and industry employment contracts through which firms ensure they own the customers?

Have these adviser wannabes done anything to help build their profession? Have they joined the National Association of Investment Professionals, the Financial Planning Association, the Society of Financial Service Professionals, the National Association of Personal Financial Advisors or other groups? Are they active in money management consulting groups like the IMCA or the ICIMC? Are they involved in shaping policies of the CFP board? Are all these groups consistent in pushing for fiduciary status?

Instead of debating semantics, adviser wannabes should fight to create the fiduciary world they want.

Brokers and reps: I look forward to your calls.

When I saw NASDR enforcement's recent action against Morgan Stanley Dean Witter for misrepresenting closed-end bond funds, I rejoiced - sort of. The regulator detailed how reps had been misled by the firm (see "From the NAIP"). Brokers can share in some of the blame, for sure, but the NASDR's focus is appropriately on the company.

In its charging document, the NASDR also says brokers were told "that they should trust TCW, the fund manager, rather than be concerned about various features or risks of the Term Trusts," and that "branch and regional managers were compensated in part based on the amount of Term Trust sales."

Let me suggest a couple of things. First, all sales manager compensation plans and incentives should be disclosed (brokers' too).

Second, regulators should ban "internal-use only" marketing materials. It is frustrating to see brokers wrapped up tight by overly protective compliance departments, while few safeguards exist to protect them from half-truths.

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