Andrew Gluck

ContactAndrew Gluck is a veteran financial reporter and the founder and CEO of Advisor Products Inc., a marketing company serving 1,800 financial advisory firms.
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Advisor Products Inc.

Make It Real: A Guide To Tapping The Power Of Doing The Right Thing edit
Wednesday, July 11, 2012 20:58

Tags: advisor industry people | fiduciaries | integrity | marketing | sec | securities fraud

Bill Ramsay, a frequent commenter on A4A, tersely ripped into me today and yesterday for a post I penned criticizing the SEC for not doing a better of regulating mutual fund sales practices on Wall Street. The exchange got me thinking about how you can make life more meaningful by doing things that matter, doing what's real.

Ramsay and I first met on a Morningstar Advisor-sponsored cruise to the Caribbean in 1997 or ‘98. While Ramsay’s real expertise is in wealth management, he also knows how to write code. In 1998, when I was first learning about what would become Web-based portfolio management software, Ramsay taught me a lot about databases and practice management. He built an integrated workstation before most advisors appreciated what that meant. His contribution to A4A is always intelligent, honest, and well-intended.

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Andy, what planet are you living on!!!!!” Ramsay wrote in a comment about a recent story I wrote entitled,

“JP Morgan Chase Murtual Fund Sales Scandal Shows SEC Is A Joke At Investor Protection: RIAs Should Rise Up Against The SEC And Be Advocates For Investors.”

 
Ramsay thinks I got it wrong, and FINRA should be blamed for the shoddy regulation of mutual fund sales by Wall Street.
 
I responded by saying, “The SEC is responsible for making sure FINRA does its job. The buck stops there.”
 
Ramsay shot back: “How about you fire half your staff but sign on 50% more customers, and then tell your staff that they're a joke for not being able to keep up with the workload.”
 
My response: “You don't need much staff to know if firms are committing the same violations over and over again for decades. If you do real stuff, you can do it with a small staff.
 
“You should know that,” I added, reflecting my respect for Ramsay’s ability to program his own integrated app years ahead of other advisors. “You do it.”
 
“SEC needs to create a credible deterrent,” I added. “Nothing complicated. Put a Wall Street CEO in jail.”
 
That got me thinking about how important it is that we keep things real. Yeah, that’s a cliché. But I really mean it.
 
If the SEC actually did its job, we would not need more rules or regulations.
 
Ramsay is right about FINRA being the first defense against bad mutual fund sales practices. If FINRA did its job, the SEC would not have to step in. FINRA, as Ramsay says, is not credible. But the SEC is supposed act as a check of FINRA.
 
FINRA is a company that reports to the SEC. The SEC is the people of the U.S.
 
If the SEC would be using its powers to prosecute Wall Street firms civilly and refer cases to the U.S. Attorney for criminal prosecution when appropriate, Wall Street not be prosecuted for the same immoral behavior over and over and over again.
To be clear, if the SEC made it real, it could create a real deterrent.
 
The JP Morgan Chase’s mutual fund sales abuse episode is a summer rerun. In 2003, Wall Street giants paid huge fines to settle fraud charges in the last big mutual fund scandal. In 1995, an SEC study led by Merrill, Lynch’s former chairman, chastised Wall Street for the very same thing JP Morgan Chase is being accused of now.
 
The SEC keeps regulating the same crime over and over because it is not creating a credible deterrent to fraud. It has not made it clear to Wall Street executives that corruption in dispensing financial advice will not be tolerated. Nor is FINRA is doing its job. Unethical sales practices are a business risk for Wall Street.
 
But it does not have to be that way. Criminalizing corporate crime will clean it up fast.
 
Herein lies a lesson and, maybe, inspiration to be great.
 
If you are you going through the motions like the SEC, people know. Your clients know because you are not caring for them properly or they do not feel connected to you.
 
Unless you make it real by personally connecting with clients or enabling your staff to personally connect with clients and do great work, you are just going through motions. You have as little credibility as the SEC.   
 
To make things real, speak truth. Be courageous about what you believe in. Moral courage is rare but valued. It’s also not easy to do.
 
A rant like this, in which I actually did say that the SEC should put a Wall Street CEO behind bars if that’s what it takes to gain credibility as a regulator, may mean Wall Street firms won’t ever hire me. (Merrill Lynch reps, sadly, will never get AdvisorVault.)  Who cares?
 
I hope that’s not the case but I don’t want to work with companies that don’t like truth. Put another way, I want to work with firms and people that admire transparency and integrity. I hope that standard attracts Wall Street firms.
 
Point is, what’s important is being real! What's important is doing real stuff that you believe in. When you do that, it attracts good people and good business. I'm speaking from personal experience.
 
Make it real in your blog, in your financial plans, and in meeting with clients. Make it real with your staff and everyone else in your life and people you meet.
 
Do not live with lies or go along with fooling yourself. Make it real!
 
 

 

Comments (2)

...
JakePlanner
Andy's right, the only way corporate crimes end is when a corporation goes to "jail". You don't hear much about auditing fraud, ever since Arthur Andersen got the death penalty.
It's time for a 2 strikes and you're out law - do it twice, lose your corporate charters, stock goes to zero. That's the only way to stop the fraud. And Andy, be glad the Merrill can't buy your stuff - they've been the dummies in every fraud/bad investment for 30 years, and it's only a matter of time before....
JakePlanner , July 12, 2012
...
stephenw585
Andy, you are exactly right.

This is my biggest beef with Dodd-Frank. We don't need more regulations, we need the SEC to enforce the regulations we have. And to do it in a responsible way.

I have been through many FINRA and SEC exams, and I can tell you they don't care how you treat your clients - they want to make sure your paperwork is in order. If it is not, you get slapped, regardless of how your clients are handled. And if you have good procedures and follow them, you can do all kinds of bad things to clients and no one raises an issue.

Economists have demonstrated that the more regulated an economy is, the worse it does. We are adding layer after layer of regulation, crippling businesses, and no client will be any better off. If we can get the SEC to enforce the rules we have in a logical, client-centered way, we would all be better off.
stephenw585 , July 14, 2012

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