When an advisor is fired, his or her options are limited. The conventional wisdom may be that the advisor’s future depends on the details of the termination, but the truth is that some firms are reluctant to touch someone like that, especially if there is no established relationship.

Top-tier firms can’t and won’t hire people riddled with compliance issues; their own compliance won’t allow it. As a recruiter, when I find out an advisor has three compliance issues, there are some firms I just can’t submit him to and I tell him so.

I’ve had advisors with a potential deal pending drag their feet on making a decision and then be fired in the middle of things. The prospective offer is invariably pulled.

I’ve had advisors who have never returned my call and even said, “Take me off your list,” who call me later when they’ve been let go. Rarely does this turn out to be a success story for the recruit or the recruiter. Although some may ultimately land at a firm, the reality is that the new firm is far from the advisor’s original top choice.

"LIKABLE GUY"

Although I have no personal knowledge of what transpired with the case of Thomas J. Buck in Indianapolis, the more I read about it, the more it makes me cringe.

Word on the street is that he is a likable guy and was honored many times as a top producer in the state of Indiana, but even a likable guy with billions in assets is not immune from the rules. According to the FINRA consent decree, Buck “pursued unethical and improper business practices, which generated increased commissions and revenues and enhanced his status as a top-producing broker.”

As a longtime employee of Merrill Lynch and one of its top producers in the country, Buck apparently regularly garnered praise, at least until his FINRA BrokerCheck record had its first blemish in 2006. Buck only had one client complaint, alleging excessive fees and unauthorized purchase of a security. The complaint was settled for $75,000 that same year.

Other disputes have emerged since then that are either settled, denied or pending, according to FINRA.

Buck’s circumstance may have been compounded by the fact that his commission-based business generated 80% of his revenues, while the average at Merrill’s Indiana offices was 70% fee-based. There is a possibility that the manager involved might be in trouble for failing to be alarmed by this disparity and for failing to supervise more effectively; this could potentially put his or her job in jeopardy. Once an advisor has so many complaints, his or her manager might well be forced to go down with the ship.
RISKY HIRE

When Buck was fired by Merrill Lynch, his options were undoubtedly more limited than he may have anticipated in light of his renown within the industry. He may have met with a few firms that tried to look past his U-5, but these meetings are likely to have gone only as far as some legal discussion. With many complaints on his U-5, some firms may have had no choice but to decline completely.

RBC Wealth Management, however, hired Buck after his departure from Merrill Lynch. RBC’s decision to take this risk may have been hedged by the fact that the move included Buck’s daughter. When Buck was ultimately permanently banned from the industry, Ann Buck, who was not involved in compliance issues, took over her father’s practice. It is unclear how much of the $1.2 billion in client assets he oversaw for Merrill actually moved to RBC.

Buck’s disbarment, however, will be another opportunity for Merrill to make an aggressive attempt to regain the assets that did move with Buck following his termination in March. His daughter, also a cheerleader for the Indianapolis Colts, will have to play defense, and may even take this opportunity to partner with someone in her RBC office.

AMBITION OR ARROGANCE?

In speaking with a former advisor who also was banned from the industry, I asked about what happens next. The former advisor, who worked as an independent practitioner and would tell his story on the condition that he not be identified, said the appeal process took him five years and ended in 2014 with the same decision. He described several levels of appeal within the system and said, “Once they make a decision to ban you, it’s near impossible to get the decision reversed, especially when it has to do with fiduciary duty.”

Perhaps not surprisingly, the former advisor had sympathy for Buck. “Why should it matter if he charges more to clients?” he asked. “If he does a better job and clients are happy with what they are paying, I don’t see the problem.” He pointed out that hedge funds charge high fees and many clients are happily making money.

Was it pure ambition to be the No. 1 producer that caused Buck to lose sight of the rules? Was it an honest mistake by someone who truly wanted to do right by his clients and just got sloppy?

It’s hard to say if it was ambition or arrogance, but there’s a lesson here. No one is immune from following the rules, and the rules are meant to protect the clients. Investment firms are cracking down and even if you have both longevity and billions in assets, you might be under more scrutiny. If you haven’t played nice with your manager, that might come into play as well because the manager will ultimately have some responsibility in the action.

When FINRA banned Buck from the industry, it continued what is starting to feel like a trend as regulators appear to be cracking down on how high-end financial advisors run their businesses. It’s time to take a closer look at how you are running your business to make sure you’re not stepping beyond the bounds of the rules.

Elizabeth McCourt is a contributing writer for On Wall Street and senior vice president at Renaissance Unlimited, a financial advisor recruiting firm in Southampton, N.Y.

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