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Aug 09, 2022

Scandals Lurking In The Shadows

With a large percentage of financial advisors and client associates continuing to work from home, do you think scandals will be higher or lower than the historical average? My instincts say higher. It’s just a matter of time before we begin to see fraud, theft, unauthorized trading, forgery and selling away, coming out from the shadows. Regulators know it. Wall Street firms know it. And I suspect you know it as well.

If we know it’s coming, why don’t we stop it We can’t. Employers and employees are at an impasse. Employees want to work from home, and for compelling reasons.Health concerns about working and commuting in close proximity of others, lack of safety in urban communities, and achieving a better work-life balance. On the other hand, branch managers want employees to return to the office in order to foster collaboration, build culture, facilitate training, evaluate talent, and provide proper supervision. However, with 300% recruiting deals, they are not willing to run the risk of forcing financial advisors to work in the office a minimum number of days per week. The same is true for client associates. Firms just aren’t willing to concede any ground to their competitors given the historically low unemployment rate. No one can afford to lose the war to retain talent.

Before going further, I want my valued colleagues to be clear on context. Ninety-five percent of wealth management financial advisors and client associates possess a strong moral compass. Not unlike any profession, however, five percent are unethical or motivated by greed.
Regrettably, they’ve been known to shatter investors’ lives, and tarnish the reputations of good firms as well as the trustworthy financial advisors who work for them.

Fortunately, most scandals – when they do occur – will be small, inflicting only minor damage on their victims. However, some may have more dire consequences. Scandals are more than New York Post headlines. They are crimes who hurt retirees, widows, widowers, endowments and hard-working business owners and executives.

I’m an old-school manager who believes you can’t manage (or supervise) those you don’t see regularly. Managers nowadays don’t see their financial advisors and client associates for weeks, sometimes even months. That’s unacceptable! Shame on the employees. Shame on the employers. And, shame on the regulators.

Yes, technology is an effective tool that provides valuable insight into the actions of financial advisors and client associates. However, it’s a supplement, not a replacement for in-person management and supervision. Anyone who believes to the contrary is likely an academic. He is surely not someone who has ever worked in a field position.

While I surely hope my thesis is wrong, my decades of experience suggests otherwise. When the scams go public, and the press sells thousands of newspapers at our expense, who will pay the price?

There is inherent value to institutional structures, and every once in a while, we’re reminded of their benefits when we abandon them.

Paul Sullivan
Founder and Managing Partner
Wealth Management Independence