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Five Ways to Avoid Being Terminated in a Hypervigilant Compliance World

While the rules may not have changed, it appears the consequences have—and advisors are feeling more vulnerable than ever.

While the desire for greater freedom and control is one of the most common drivers of movement, there is another motivator that’s becoming just as prevalent: the constant sense of vulnerability.

In a world of hypervigilant compliance departments dinging advisors for often minor “non-sales or non-client-related” practice violations, there is zero room for coloring outside the lines. Many advisors find themselves looking over their shoulders waiting for the proverbial shoe to drop—and they’re growing tired of it.

Let’s be clear: We’re not talking about unauthorized trading, mishandling of funds or fraud. Instead, we’re talking about infractions that can best be described as what a firm might once have considered “good to learn from” experiences. More specifically, these are violations of internal company policies, such as paperwork or filing errors.

As Tom Lewis, a board-certified civil trial attorney at Stevens & Lee based in Princeton, N.J., shared in a recent podcast interview, “A lot of advisors have obviously not had the day-to-day interaction with management or the compliance team that they would have in the office [due to the work-from-home mandates]. So, we are seeing an avalanche of financial advisors effectively charged with certain internal acts, violations of company policy or regulations and compliance initiatives where those financial advisors who have unblemished records are now being brought up internally—and in many situations have actually lost their jobs.”

In fact, high-profile, billion-dollar-plus teams have had a target on their back for quite some time now. Take for example, $2.9 billion advisor Bruce Lee, who was terminated in 2018 from Merrill Lynch for failure to complete mandatory compliance training; or Craig Findley, the head of a $6 billion team terminated from UBS in 2019 for a similar reason; and most recently, David Weinerman with $1 billion in assets who was given a pink slip from Morgan Stanley for unspecified firm policy violations.

For these advisors and others like them, size and tenure did not give them a free pass—and they should serve as cautionary tales for the rest of their colleagues.

While violating firm policy may not have garnered more than a slap on the wrist a decade ago, in a zero-tolerance world, it appears the consequences are now far more dire. As such, advisors need to adjust their own behaviors if they wish to continue to build their businesses in the wirehouse world.

How Advisors Can Make Themselves Less Vulnerable

There are five key steps advisors can take to retain agency over their business lives:

  1. Keep the target off your back. First and foremost, don’t give your firm reason to terminate you. Always be a good corporate citizen. Keep your eyes and ears open for any changes in policy—and even if you don’t agree with any new mandates, be sure you are honoring them.
  2. Always have a “Plan B” at the ready. Stay educated on the landscape and know what your options are. Have a proverbial rip cord that you can pull if need be.
  3. Know your rights and any restrictions. Be sure you understand any agreements you have signed over the years—and are clear about any post-employment restrictions or limitations.
  4. Have an attorney on speed dial. Build a relationship with an attorney who specializes in the financial services industry; they can help assess the reality of any possible infractions or concerns that arise.
  5. Trust your gut. If you are feeling there might be something that has you in your firm’s crosshairs, don’t sit back and wait it out. Connect with your “personal board of directors”—which may include an attorney, a recruiter and any other trusted guides who can help you understand your options.

The reality is that as long as you’re an employee, you are not in complete control. It’s the firm’s game and their rules. If you can fully accept that fact, and live with any possible consequences, then you’re in the right place.

Ultimately, regaining agency over one’s professional life is the deciding factor between stay versus go. If having that control is what’s most important to you, then it might actually be time to consider other options.

Mindy Diamond is CEO of Diamond Consultants in Morristown, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.

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