Would Deborah's numbers entice clients who have been disgruntled after a market drop to go after her in arbitration because she now has real assets in their eyes? Will this increase her likelihood of being named in arbitration? My thought is yes. The rich gal is a more enticing target than the poor one.
Instead of suing just the company, perhaps suing both advisor and company will now be the new normal. How much more will Deborah have to pay in errors and omissions insurance? The premiums are already exceedingly high, but, if enacted, these regulations could make them prohibitive.
Moreover, who's to say that the type of deal that Deborah expects will even be there in a few years? Assets are leaving the wirehouses, and eventually the deals are likely to become less generous. It seems possible that compliance officers will soon be putting pressure on recruiters to reduce the upfront bonuses they are offering. Top deals are now around 150%. If Deborah decides to take a wait-and-see approach to her move, she may not be as well compensated for having suffered the consequences of the lack of back-office support.
While Deborah runs a reputable practice and wants to do the right thing by her clients, FINRA may end up punishing her and harming her practice by putting out her private matters for all to see. It only takes a couple of bad eggs to ruin the batch, right? Don't 10% of your clients cause 90% of your problems? When 2015 rolls around, that 10% will be much more difficult to deal with. Do yourself a favor and jump while the jumping is good.
Carri Degenhardt-Burke runs Degenhardt Consulting in
Jersey City, N.J. For further information, call
201-395-0222 or visit www.degenhardtconsulting.com.