he says. “Ever since FINRA took over RIA regulation, it’s been a long,
slow push until finally you can’t practice anymore as an independent
advisor. Trust me, I held out as long as I could.”
“For a while they just tightened the compliance screws, so it was
impossible to do any work unless you were connected to a big compli-
ance department. So I affiliated with an independent broker-dealer who
told me I could do what I wanted; no sales requirement. I figured since
they had supported FINRA regulation, they’d be around for a while.
“Boy, was I wrong,” he continues. “They were the first targets. FINRA
decided that all their reps would have to be employees of the firm — to
protect the public, you understand, by having closer supervision. The
last independent B-D sold out to the brokerage firms five years ago.”
“But the car said you were a fiduciary,” I protest.
“Everybody is a fiduciary these days,” Joe says. “But all that means
One day, everybody may be a fiduciary,
is that people in the home office monitor everything we do and fill out
the right paperwork. And, oh boy, do we disclose. Did you read the
I shudder. “Yes.”
but all that may mean is that people in the
home office monitor everything you do.
“But what does disclosure matter if you can’t get access to finan-
cial advice any other way?” Joe asks. “They say we’re not a monopoly
because there’s more than one firm. Actually there are two now, since
the last round of scandals and bailouts.”
“What were the scandals about?”
“Same as the one before and the one before that — making crazy bets
on derivatives that nobody understood, and selling packaged junk at a
huge markup to their customers. I refused to get involved in it, and my
bosses complained I wasn’t a team player. But ultimately it didn’t mat-
ter; the markets tanked each time, taking my clients down with them.”
“Let me guess; the only response from Washington was to demand
that FINRA impose more paperwork.”
“I guess some things never change,” Joe says.
“So you sell investments for a living?” I ask.
“Technically, I’m a fee-only financial planner,” Joe responds wea-
rily. “I’m paid a salary for the work I do. But at the end of the year,
they tote up everything I recommended to my clients, everything they
bought, and I get a bonus that bears a suspicious resemblance to what I
would have made if there were commissions involved.”
“And nobody has caught on?”
“Everybody has caught on. But where else are consumers going to go
for help? What’s Congress going to do, when there isn’t any paper trail
between my production levels and the year-end bonus? And why would
they look into it, when my firm buys their reelection every few years?”
“I hate to be this way,” he replies. “Look, I
know you must have come from the past or
something, so . .. let me give you a tip. Maybe it
will help your portfolio survive the Great Broker-
age Scandal of 2014 or the Bailout of 2019 or the
... anyway, buy stock in cat food companies.”
“Cat food?” I say. “Are there a lot more cats?”
“Those companies suddenly pick up a new
customer base, and the earnings go through the
roof. They make a huge business selling to retir-
ees who took the advice of their brokers after
brokers became the only game in town,” he says.
“Just don’t tell anybody you heard it from me.”
BACK TO REALI TY
When I arrive back home in the present, I go
to visit Joe in his office. He looks so young and
cheerful it almost breaks my heart.
“How’s business?” I ask.
“It couldn’t be better,” he says. “Some days
I wake up and can’t believe my luck. I work in a
profession where my only job is to help people
get ahead in their lives. Every week, it seems,
somebody comes in who was screwed over by
one of the brokerage firms, and now they know
to ask for real unconflicted advice. I wonder
sometimes how the brokers stay in business,
but I figure sooner or later they’ll catch on to
what the public really wants, and start to give it
to them. Meanwhile, they’re just creating more
and more business for little firms like mine.”
“I guess that should have told us everything
we needed to know,” I say.
I stand up. “I just stopped by to say good luck
as you move forward in your career,” I say.
“Who needs luck?” Joe says cheerfully as we
walk back to the lobby. “For fiduciary, client-centered advisors,” he says, “the future couldn’t
be brighter.” FP
Bob Veres, a Financial Planning columnist,
publishes the Inside Information newsletter
and website for advisors at bobveres.com.
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