© 2020 Arizent. All rights reserved.

Advisors: How to Avoid Getting Fired

Register now

Although successful advisors are in great demand and enjoy a high degree of job security, they also remain "at will" employees who can be terminated for any reason. And in case you thought otherwise, any recruitment or retention "deal" you may have received does not constitute a contract of employment.

Sadly, getting fired is not such a rare event. Every month, even as my firm helps teams of advisors find new homes, we also inevitably get a call from an advisor who is being terminated. While the Big Producer (BP) has firms bidding for his services, the Terminated Advisor (TA) goes begging for a job.

While the BP can thoughtfully take the time to conduct due diligence on the new firm to ensure that it's a good fit for her and her clients, the TA knows that his book is losing value for every day he's out of work. Many firms now have a hard and fast policy not to hire TAs. They are afraid that they will never know the entire story behind the termination and therefore expose themselves to both reputational risk ("we hired somebody else's problem") and increased regulatory scrutiny. And, of course, the great irony is that the TA was usually once and for many years a BP.

Keep It Legal
So how does a BP keep from becoming a TA? What are the most common career killers that I see year after year?

The most basic rule is almost too silly to write down: Don't be a criminal. There are still some advisors who are either desperate or dumb (or both) and figure they can somehow steal their clients' money.

More common are advisors who get caught up in circumstances outside the industry, which cost them their jobs. If a disagreement turns into criminal assault, you are putting your career at risk. If your night on the town turns into a DUI, you are putting your career at risk.

Follow Firm Rules
But even legal behavior can get you fired if it violates firm policy. It may seem like common sense to avoid these behaviors, but the following are all examples of things that advisors have done that led to their termination:

  • Viewing pornography in the office on a company computer
  • Sending an offensive joke of a sexual or racial nature via company email
  • Having a workplace affair that opens the door to a sexual harassment suit
  • Screaming at another employee, such as a sales assistant
  • Lying to a company officer or attorney about ANY sort of inquiry
  • Fudging an expense report
  • Following an email instruction to wire funds out of an account without calling the client for confirmation

Don't Trade Without Consent
This last, along with other varieties of unauthorized trading, has been costing advisors their jobs for decades. There are still a large number of advisors who engage in commission-based trading as a significant part of their practices, because there are still many clients who prefer to invest that way.

When an advisor places an unauthorized trade, he or she is rarely just attempting to generate a commission and is in fact attempting to protect a client from a falling position in a security. When an advisor does this, however, he is opening himself to the possibility that the client will lodge a complaint that could lead to the advisor's termination. Ironically, an unauthorized transaction that protects and is in the best interest of a client might not result in a complaint, but could still get the advisor in trouble with his or her firm.

Many firms have become overbearing in the use of technology to monitor unauthorized trading. If an advisor enters too many commission-based trades within a short period of time, automated systems will alert compliance and will prompt a phone call to the advisor. The assumption is that the advisor would not have had enough time to explain each transaction to so many different clients.

One advisor complains: "They don't understand the way that business is done. Maybe I had dinner with a client and got permission to make a trade for the next day's opening. While dropping off my son at school, I bumped into another client who asked me to sell something for him because he needed the cash. Throw in a proactive phone call that I made, and it might result in three transactions made in a couple of minutes for three different clients. That will result in a call from compliance questioning the trades."

Unfortunately, the wealth management industry has made its own mistakes over the years that have resulted in hundreds of customer complaints against their advisors. One of the most talented and respected wirehouse BPs in the industry explained his method of avoiding "enterprise level" bad investments for his clients: "If a product presentation meeting starts with how much money the advisor will make, I just walk out. These hardly ever happen anymore, but there are still products out there that charge too much. I am suspicious of any product that takes too long to explain and that charges more than 1% of the client's money."

I asked the same advisor what advice he would give to a newly minted advisor about staying out of trouble: "There are some bad clients out there. If you do not feel comfortable with a client or if the prospect does not want to work the way that you work, with your processes and procedures, then walk away."

So how do you keep yourself from becoming a TA?

  • Avoid the latest product fad that charges the client too much money.
  • Document your conversations with your clients.
  • Document your conversations with your firm about any operational or compliance issues.
  • Alert the appropriate authorities within your firm to any potential complaints as soon as possible.
  • Remember that a cover-up is always worse than the actual infraction.
  • When in your office or at company events, remember that indiscretions and inappropriate behavior could cost you your career.

But don't take this list as the last word on the matter. The potholes left over from winter storms eventually get filled; the "potholes" that can destroy your career, however, aren't seasonal and seem to multiply every year.

Danny Sarch is president of Leitner Sarch Consultants (leitnersarch.com), a boutique search firm specializing in the wealth management industry.

Read more:

For reprint and licensing requests for this article, click here.