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[av_heading heading=’An Advisor’s Guide to Termination: A Proactive Approach to Protecting Your Life’s Work’ tag=’h2′ style=” subheading_active=” show_icon=” icon=’ue800′ font=’entypo-fontello’ size=” av-desktop-font-size-title=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=” av-desktop-font-size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-desktop-font-size-1=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” subheading_color=” seperator_color=” icon_color=” margin=” margin_sync=’true’ av-desktop-margin=” av-desktop-margin_sync=’true’ av-medium-margin=” av-medium-margin_sync=’true’ av-small-margin=” av-small-margin_sync=’true’ av-mini-margin=” av-mini-margin_sync=’true’ headline_padding=” headline_padding_sync=’true’ av-desktop-headline_padding=” av-desktop-headline_padding_sync=’true’ av-medium-headline_padding=” av-medium-headline_padding_sync=’true’ av-small-headline_padding=” av-small-headline_padding_sync=’true’ av-mini-headline_padding=” av-mini-headline_padding_sync=’true’ padding=’10’ av-desktop-padding=” av-medium-padding=” av-small-padding=” av-mini-padding=” icon_padding=’10’ av-desktop-icon_padding=” av-medium-icon_padding=” av-small-icon_padding=” av-mini-icon_padding=” link=” link_target=” id=” custom_class=” template_class=” av_uid=’av-lkiphy9o’ sc_version=’1.0′ admin_preview_bg=”][/av_heading]

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by Wendy Leung | As seen on AdvisorHub.com…
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Amid a growing number of reasons advisors are finding themselves under compliance scrutiny, it’s more critical than ever to be aware of how vulnerable your business—your life’s work—is to potential and unseen landmines.

Expense account violations, improper use of personal cell phones, and unapproved content in email correspondence are some of the reasons advisors are either placed on heightened supervision or, in some cases, terminated in today’s compliance-driven environment. Even advisors with clean records and the best of intentions worry they might inadvertently cross a line that could damage their careers. Understanding how internal investigations and terminations play out can help advisors protect their businesses and land on their feet. These insights are culled from years of experience working with advisors that have been investigated or terminated and successfully made it to the other side.

Let’s start with internal investigations. 

“What are they? And, will I know if I am being investigated?”

Internal investigations are exactly what they sound like, a review undertaken by your firm’s legal and compliance team to gather the facts surrounding a potential infraction. These can include everything from sales practice violations to a breach of internal administrative policies, email and social media guidelines, or HR issues. Typically, an advisor is informed that they are being investigated and is often asked for cooperation in answering questions and providing documentation.

“Is it possible to switch firms while I am under internal investigation?”  

The reality is that not all firms will consider an advisor with an open investigation. For those that will, there will be an extensive review of the situation by the firm’s legal and compliance team. For a firm to move forward, it typically must determine that the infraction doesn’t violate its own internal policies and that there is no ongoing regulatory investigation resulting from the incident. In no instance should an advisor try to hide that they are under investigation: The information will most certainly come out, destroying credibility. In fact, the pre-hire paperwork at most firms includes a question regarding internal investigations. At the end of the day, moving while under investigation isn’t a slam dunk and will, in most cases, still result in a mark on an advisor’s U5. That said, if the alternative is almost certainly a termination, it may be the better choice.

“What if I am afraid that the internal investigation could result in my termination? Should I leave preemptively?”

That’s a tough one since the reason for the investigation will have a significant impact on whether a new firm will consider bringing you on board. Preemptively hiring an attorney to help determine your risk of termination and beginning due diligence with a trusted recruiter to understand how hirable you are will help to make the decision. Ideally, advisors should always have a solid “Plan B” in place.

With the increased frequency of advisor terminations, even top advisors who once felt their production levels shielded them are watching firms cut ties with their peers. Why? Enhanced scrutiny from the Financial Industry Regulatory Authority and aversion to negative headlines has resulted in firms prioritizing risk management over revenue. So given the change in climate, it’s essential for advisors to have the answers to some basic questions.

“What types of things are advisors being terminated for?” 

Of course, terminations for sales practice violations, like unauthorized trading, churning, and unsuitability are expected. But we’re also seeing pink slips issued for expense account violations, unapproved email correspondence or social media posts, undisclosed outside business activities, and failure to complete mandatory internal training. In the past, these types of violations often resulted in heightened supervision if they were first-time offenses and the advisor had a clean compliance record. Unfortunately, today they are more likely to result in a termination, as firms don’t want to take on the responsibility and risk that monitoring the situation could entail.  

“What can I do to protect myself?”

Don’t think an exception will be made because you run a big business or have a clean compliance record. Always disclose anything that even feels close to a gray area before getting involved and get written “pre-approval” from your compliance team to avoid any confusion if something gets flagged in the future. And always have a “Plan B” ready: 

“If I am terminated, what can I do to get rehired?”

Immediately hire an attorney and call a good recruiter. The attorney will help to prepare a written explanation of the facts surrounding the termination and will also try to impact the U5 language posted by the former firm, since both will be critical in determining hire-ability. The recruiter will help you choose the firms to consider based on the reason for termination and the hiring environment. After that, it’s important to always be transparent about what happened, acknowledge the mistakes made, and ensure that it won’t happen again. An advisor destroys credibility by blaming the situation on others and by not being forthcoming with all the facts. Although getting through a termination is incredibly stressful, sometimes there is a happy ending.

Although most advisors may never be investigated or terminated, it’s essential to have a Plan B at the ready. In the view of one top advisor and former Merrill ACTM chair, Kelly Milligan, “Firms have shifted from managing risk to trying to eliminate it.”
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