The best part of this year's recruiters' roundtable was watching the accomplished, intelligent, experienced recruiters who participated completely lose their cool.
The topic that incited their collective meltdown? The proposed bonus and incentive compensation disclosure requirements recently approved by FINRA and currently being reviewed by the SEC. The rules are intended, according to the regulator, to inform clients when an advisor gains a significant pay-out for switching firms.
As the people responsible for helping advisors make that switch, recruiters are not enamored with the idea. They used words like "discriminatory" and "illegal" and claimed that the rules would dramatically impact the movement of advisors between firms. They alleged that regulators were focusing on bonus disclosure because these involve "big, sexy numbers" that somehow leave the impression that an advisor is doing something wrong by accepting one. But, at its core, their real concern was that clientsespecially the less affluentwon't understand what those big numbers mean and will start asking a lot of uncomfortable questions.
This, as I see it, speaks to a much larger problem that FINRA should address instead of the tangential issue of bonus dislosure. Most clients, even educated, wealthy ones, frequently have no idea how their advisor is paid. Rather than spending all this time and energy forcing advisors to do a big reveal, but only when bonuses are involved, FINRA should mandate a comprehensive, in-depth discussion between advisor and clientnot a pamphlet, not a disclosure document that no one ever readsabout exactly how the advisor is going to make money on the relationship. As long as that discussion is overlooked, as it frequently is, all the bonus disclosures in the world won't fix what's fundamentally wrong with advisor compensationthat most clients have no clue how it's generated.