RECRUITING: When the Compliance Door Slams Shut

There is a segment of the advisor ranks out there that can be considered ‘special circumstances’. These advisors have taken hits to their compliance records, either through actions that they regret and would like to take back, or from circumstances out of their control related to client expectations gone wrong, changes in firm policy, disagreements with management, among others.

These advisors may still have outstanding businesses, loyal clients, sizable revenues – all the things that may make them attractive to firms up and down the deal yield curve. But what happens when their compliance record begins to dominate the deal conversation, as opposed to their years and years of service without a blemish? How should an advisor or team handle it.

Understanding that different types of compliance issues and there severity are part of the reality in today’s recruiting world. But maybe the best way to evaluate the possible upside and downside of the language in your U4 should be purely mathematical.

For example, if a wire to wire deal is going to get discounted from a possible 225% down to 140%, maybe doing a 10 year pro forma connected to an independent deal, or a platform opportunity with an Interactive Brokers, a Pershing, a Focus Financial, or an entity that is organized as such. 

The RIA option could prove to be, long term, more profitable than accepting a discounted deal because a wirehouse views a blemish on your U4 as an opportunity to get heavily discounted assets in the door.

Maybe the right way to manage the conversation regarding your compliance record is to take the bull by the horns and apply pure mathematics to the longer term equation i.e. position your business with a platform firm and take control of your grid, costs, etc.

That may be the best answer to any compliance question you find yourself answering in the recruiting song and dance.

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