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No one wants to get fired, get sued or even get a client angry at them. In many cases advisors get on with clients extremely well. However, that “Do whatever you want” attitude can be turned upside down, especially when compliance and lawyers get involved. You will be labeled a “Rogue Advisor” faster than you can say “Rogue Advisor.”
Getting Fired is Easy
Any of these infractions can get you fired. Some upon discovery, others a few days later when a complaint is made.
1. Placing orders in another’s account without a POA in place. ‘That sounds great! Let’s buy some in my husband’s IRA too.” Unless there’s a Power of Attorney on file, they don’t have the authority to make that trade. If a dispute or divorce arose, they could say: “I never authorized that trade.” All eyes are on you, the rogue advisor.
2. Client trading on inside information. You’ve seen it before. The guy who never buys individual stocks suddenly wants to go all in on his own company’s stock or even worse, short dated options. The exchange and other regulatory authorities have software to pick up on trading anomalies. Using “Know your client” logic, you will be tarred with the same brush. Your firing will be a footnote to the headlined story.
3. Signing your client’s name. There are still lots of documents requiring client signatures. If you help a client out by signing their name or their spouse’s name, that document will live forever. Suddenly your client has significant leverage over you because you forged a signature! That’s illegal! This will eventually come out. You will get fired.
4. Taking money out of a client’s account. It’s a recurring theme on TV dramas where the financial advisor is the bad guy. You might only intend to borrow it for a short time, then replace it. The problem compounds. The client finds out. They complain. You get fired.
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5. The really private placement. You can tell a client about a sale at the local Lord & Taylor, but you can’t offer to let them in on a real estate deal setup by a friend to buy that shopping mall. Your client sees you as an agent of the firm. They consider the firm has a degree of responsibility if an investment you suggested goes south. That’s why anything you suggest to a client has to be a product the firm has put through its due diligence process.
6. The cash discount. In different cultures, negotiating for a discount is expected. You’ve heard the expression: “For you, I give you a special price.” You can do this on commissionable stock trades and fee based accounts, but you can’t on mutual funds or insurance products where the fees and commissions are built into the pricing. Your client might suggest this could be solved by a simple cash payment from you to them. Expect to be fired.
7. Laundering takes many forms. Your client owes some money on a trade. Maybe you have a piece of business and you are just waiting for the client to commit. They are ready to move forward, but the payment is in cash! Your firm doesn’t accept cash. They didn’t get a chance to get to the bank. If you could just deposit this in your own account and write a check into the client’s account, then everyone gets what they want. Except you will get fired.
8. Afterlife trading. You’ve heard in general conversation, your client living across the country has died. Rats! They were such a good client! They agreed with all your suggestions. They never complained about commissions. They didn’t want a fee based account. Since I haven’t been officially told they aren’t dead yet, I’ll just do a few more trades… You will get fired.
9. The joy of prefilled forms. Clients have never liked doing paperwork. Why do the Compliance people want updated client documentation for options trading the moment the market falls off a cliff? You will soften the blow by helping your client and prefilling as much of the form as you can for them. You don’t know their current income exactly, but will take a guess. Ditto the liquid cash they are holding away. When problems develop, the client disavows the information on the form, saying you made it up. You know what happens next.
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10. Discovering what a zero tolerance policy means. You make suggestive sexual comments about colleagues or worse, members of your support staff. They are uncomfortable. Even worse, you touch them. You feel this was all in good fun. The HR department thinks otherwise. The zero tolerance policy gets you fired.
11. Trading in a client’s account without authorization. Many clients say: “Do whatever you want. I trust you.” The wise thing to do is always explain in detail the rationale behind your recommendation and get their approval. It’s tempting to just cut out the client contact part altogether and just do the trades. Unless the client has granted you permission to do discretionary trading, you will get fired.
12. Accepting an expensive gift from a client. Your client thinks the world of you. They give you a Cartier watch for Christmas. The firm has rules in place concerning the value of a gift advisors can give or receive. The implication behind accepting an expensive gift is the client is thanking you for providing inside information or doing something else in conflict with the scope of your job. You don’t report the gift because the firm would say you can’t accept it. Not reporting the gift gets you fired.
Who knew it was that easy to get fired? Often big infractions start off as small ones. Even then, it’s too late.