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Compliance 'Dings' That Cause Recruitment Roadblocks

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During the past decade as a recruiter, I've seen how it’s gotten more challenging for advisors with compliance issues to get hired.

To be clear: it's not impossible for brokers with blemished records to get a job elsewhere.

Read more: Fired From Edward Jones, $1M Advisor Lands at Baird

But it's becoming increasingly harder, even for top talent, to expect an easy transition from one job to another if they carry compliance baggage. You generally must keep a clean record because what used to provide immunity from compliance problems -- longevity and productivity -- no longer apply.

There's no more "three strikes and you’re out" policy in the industry, where an advisor with a decent amount of business and a compliance issue or two could still get passed them to land at their preferred choice firm. With increased regulatory scrutiny on wealth managers, there's less and less tolerance for having any compliance problems, which throws up hurdles for potential recruits.


A close look at the compliance report of a potential candidate is pretty commonplace now, even for recruiters. In fact, many recruiters do so because firms require a review before meeting with job candidates.

Although a recruiter shouldn't provide commentary regarding a compliance record, most should be able to tell when the problems hurt an advisor's chances of receiving job offers. A review also is a good way of protecting recruiters from the liabilities of a bad hire.

Take for example the branch manager who, in his capacity as recruiter, runs candidates up the chain of command for approval. Without knowing a recruit's compliance record beforehand, managers are putting their clout at risk from exposure to the dicey problems their recruits may bring to the job. The reprimands for not properly vetting advisors may also put a manager's own career in jeopardy.

Granted, it may seem unfair to hold advisors accountable for certain compliance matters. When the auction market failed in 2008, advisors with otherwise clean records who were caught up in the scandal faced several client complaints. Firms settled and made clients whole, but the blemishes remained on the advisors' records. ARS complaints normally may not crush recruiting deals, but they definitely standout on U-5s alongside more serious compliance problems.


What are probably the worst compliance infractions? Fiduciary issues. I find that potential recruits increasingly cannot afford to have even a single fiduciary-related complaint on their record. But even minor blemishes can hurt an advisor's chances.

If an advisor had a misdemeanor arrest for something that happened while they were in college, chances are that this wouldn't be a serious blow to their job hunt. However, if the advisor has forgotten to mention a minor arrest, many firms may still take a pass on hiring them. The non-disclosure can even hurt an advisor who is already employed if it's found out, possibly ending in termination.

My advice is for advisors to report everything when filling out a compliance form. Nobody will judge what happened in the past, but if you lie or omit, you’re in trouble.

Dings to your record are problematic when considering a move, and firms can’t stress compliance with the rules enough. Neither can recruiters.

Elizabeth McCourt is president of McCourt Leadership Group, a coaching and consulting firm in Westhampton Beach, N.Y.

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