FINRA Is Pushing For Disclosure Of Signing Bonus Deals To Clients...And Why Shouldn't They?

Thursday, November 29, 2012 21:03
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FINRA Is Pushing For Disclosure Of Signing Bonus Deals To Clients...And Why Shouldn't They?

Tags: Advisor businesses | client retention | FINRA

FINRA is considering requiring advisors and their firms to disclose fully to clients the details of incentive packages when advisors switch firms.
 
Danny Sarch at Investment News thinks this is a good idea, mainly because other advisors at the migrating advisor’s former firm are likely to jump on the departee’s accounts and may say things that call into question the advisor’s reason for leaving.

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Particularly if a signing bonus is substantial, former colleagues can cast dubious shadows on the departing advisor’s character.
 
Being up front about why the new firm will be good for clients and disclosing a deal that protects the advisor’s income and makes up for the loss of future benefits prevents any dubious shadows from being cast.
 
Some advisors liken it to selling a business, yet being able to keep the business after the sale. A top recruiting bonus also signifies an advisor’s experience and expertise.
 
Sarch makes the point that some in the RIA world and other segments of the industry look down on signing bonuses and deem them unseemly. But selling a practice is often done to make money, as well.
 
Regardless of where an advisor chooses to hang his or her shingle, there’s no shame in making good money for providing value to clients and to the firms they work for.
 
In fact, when everyone involved in a business relationship comes out well financially, it’s a win-win for all. Those are the kinds of high quality relationships that lead to other high quality relationships.
 
Authenticity and transparency in all aspects of advisor businesses will trump dubious shadows any time.

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