Advisor: Time for stiffer penalties for misconduct

Advisor: Time for stiffer penalties for misconduct

Advisor: Time for stiffer penalties for misconduct It’s time for stiffer penalties for misconduct in the industry: that is the verdict of one financial advisor after new statistics were revealed showing that getting fired for misconduct often does not mean the end of an advisor’s career.

Sean Harrell, partner and senior advisor at Howe Harrell & Associates, hit out after a study from the University of Chicago revealed that almost half of advisors fired over misconduct are back to advising clients less than 12 months after their termination. Researchers also found that eight per cent of 650,000 advisors who are registered with Finra have a disclosure event on their record: ranging from criminal and civil judgments through to employment separations and regulatory judgments. Indeed more than a third are said to be repeat offenders.

The statistics hugely disappointed Harrell who believes that the hiring of fired employees by other firms is a major black eye for the industry.
“I 100 per cent think that there should be stiffer penalties for misconduct in our industry,” he said. “The fact that the majority of advisors who are fired due to misconduct are re-hired by another firm within a year is a major blemish on the face of our industry. 

“FINRA is helping but more needs to be done by the firms doing the actual hiring.  I think they are missing the big picture: sure, a less than honest advisor may bring in high revenues, but at what cost to the image of the firm he represents?”

Indeed Harrell cited a very personal case that exemplifies the problems such re-hiring can cause for the industry at large.

“I was recently referred to a husband and wife who own and operate a successful construction business together,” he said. “They sat down with me and told me that they have never had a good experience with a financial advisor. We sat down and they gave me examples of why they were disappointed: and they have every right to be disappointed after I heard what they had gone through. They were sold insurance products guaranteed not to pay out in their circumstances, they were sold high fee funds which underperformed for over 10 years and now they are wondering if they can trust me, or any advisor for that matter. 

“My job to help this couple has been made infinitely more difficult by the previous advisors who helped themselves before helping this couple. And these previous ‘advisors’ are still out there doing their thing. It’s very disheartening.”

According to the report, advisors who have a history of misconduct are “five times more likely” to be unethical again. Indeed advisors working at firms with top brass with misconduct on their record are twice as likely to be unethical.

What do you think should be done to address this issue? Should advisors get a second chance after being found guilty of misconduct or should they be banned from the industry altogether: leave a comment below with your thoughts.
  • Constance Viglas 2016-03-04 5:24:09 PM
    They should be banned, period.
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  • Debbie 2016-03-07 6:52:16 PM
    There should be zero tolerance for wrongdoing. People who handle and give advice to others should be held to the highest standard to act in their clients best interests at all times.
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