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How to Avoid Termination in a Zero-Tolerance World

The shift to a compliance-driven environment in the brokerage firms is leaving advisors at all levels vulnerable in ways they never were before.

Financial advisors at the big brokerages have witnessed a great deal of change in the firms over the past decade. Shifts in ownership, compensation and management have many of these folks acknowledging that the business is vastly different than it was back in the day or even just a few years ago.

But perhaps the most alarming of all changes is the increasingly hypervigilant, compliance-driven environment that has become a part of the cultural fabric of these firms. It’s a shift to a new world order where a zero-tolerance policy prevails, leaving advisors at all levels vulnerable in ways they never were before.

Historically, the more revenue an advisor generated for his firm, the more insulated he was from possible termination; the worst he might have expected would have been a word of warning from management. But today the opposite is true—that is, the bigger and more high-profile the advisor, the more vulnerable he could be and the more likely his firm may look to make an example of him.

Of course, terminations for sales practice violations or straight-up malfeasance are valid and appropriate. But now we are seeing more dismissals driven by incidents that are non–client related and far from malfeasance. For instance, there’s heightened scrutiny around:

  • Nondisclosure of outside business activities, such as board positions held or other businesses engaged in.
  • Human resources issues, including inappropriate conversations or arguments with colleagues or sales associates.
  • Expense report violations; for example, submitting nonapproved expenses for reimbursement.
  • Violation of company policy, such as noncompletion of corporate training modules.
  • Personal financial issues; for example, bankruptcies, foreclosures, bad debts or gambling.

In no way am I suggesting that these activities, or any others that may be in breach of a firm’s policies, are acceptable. But advisors need to be aware that how firms are responding to certain activities has changed.

So if you find that you may have crossed any of the lines that your firm has drawn, there are three key steps you can take to protect yourself and your business:

  1. Do not ignore the handwriting on the wall. If you’ve already been called into your manager’s office and told that something you did last week, last month or even last year is in any way “concerning,” do not sit back and assume all is well, even if the manager tells you it is. In today’s world, once you’ve been tagged as someone who has done something wrong, you can assume you have a target on your back and should therefore be intentional in the steps you take to protect yourself.
  2. Hire an attorney. If you have any sense that you may be on the radar of your firm’s compliance department or that termination is a possibility, now is the time to contact an attorney who specializes in the financial services industry. The attorney’s job will be to help you get ahead of this and determine the best course of action. In some cases, we have seen advisors counseled to proactively resign before they are handed a pink slip.
  3. Always have a Plan B. Whether you are in the crosshairs of your firm’s compliance department or not, every advisor should know what their Plan B is—particularly in a landscape where change has become a constant. Knowing where you would go if you were suddenly terminated is important, but keep in mind that if there is any “hair” on your employment status, the options available to you could be very different. Now is the time to develop relationships with recruiters, managers and senior leaders at competitive firms: This will help to ensure you are well-informed and in a proactive state, regardless of the situation.

The reality is that as long as you’re an employee of any firm, a certain level of vulnerability comes with the territory, and as such, you are not in total control of your destiny. The best advice for employee advisors is to stay updated on your firm’s policies and procedures and make every effort to follow them, but be sure to have that Plan B at the ready should you need it.

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