It seems that more and more high-profile and multi-billion-dollar advisors are being terminated today than in the past. If you’re an advisor, these firings should act as a stark warning. While you may feel safe from termination, because you’re ranked highly on Barron’s, hold status within the firm, or maintain substantial assets under management, there are no guarantees — your career is not protected from scrutiny.
Recently, the number of advisors terminated for reasons listed other than “voluntary” has continually and dramatically risen. While there are a number of valid reasons why an advisor should be terminated, AdvisorLaw attorneys have been noticing a trend. We’ve been seeing a spike in U5 termination cases with allegations that cast the advisor in a negative light, as well as terminations arising from zero-tolerance compliance policies. Check out some of our recent expungement awards here.
It’s crucial that advisors develop a clear understanding of how to mitigate terminations, from Form U5 language negotiation to securing their next position.
Here are some important things to remember:
- Do BrokerCheck disclosures ever fall off automatically?
- Weaponized Form U5
- Investment Adviser Representatives (IARs) Must Complete Continuing Education Program To Maintain Registration
- FINRA’s expungement reform takes a turn for the worse
- Do you have a dedicated chief compliance officer?
- If I’ve been terminated, how long will it be before a Form U5 is filed?
- Certified Financial Planners Face Tough Enforcement Under Tom Sporkin
1. Recognize that what was formerly acceptable is no longer acceptable.
Everyone takes the occasional shortcut from time to time. But in today’s workplace, even minor violations of company policy can result in dismissal. Terminations can occur due to anything from an expense-account violation, to an off-color chat with coworkers, to more serious issues, such as the use of “pre-signed” documents or other sales-practice violations.
The takeaway for advisors is that they must strictly adhere to firm policies at all times.
2. Recognize what makes it more difficult to secure employment.
A terminated advisor with one or more of the following events will likely find it even more difficult to be hired by the next firm.
- violations of sales practices
- pending client complaints
- unfavorable termination disclosure language
- multiple disclosures in the CRD or on BrokerCheck
- negative financial information
3. Review and tidy up your CRD record.
Advisors with disclosures on BrokerCheck, the CRD, or their IAPD/IARD records should attempt to have them removed through FINRA Registration or FINRA’s Dispute Resolution forum and arbitration process.
Our AdvisorLaw team of securities attorneys has expunged more than 2,000 meritless or defamatory disclosures from the public record, including tax liens, investor complaints, regulatory violations, and pending disclosures. Learn more about our disclosure expungement services.
4. Cast a wide net.
While you may know of a firm that hired a terminated advisor last year or even last month, there is no guarantee that the same firm will hire a terminated advisor tomorrow. On top of FINRA’s new Rule 4111, there are a number of other factors that firms must consider when hiring a broker with disclosures. For example, a firm is less likely to hire a terminated advisor when there are already multiple, previously-terminated advisors currently employed at that firm. A firm is also less likely to hire a terminated advisor when it hired another terminated advisor in the recent past.
5. Consider going independent.
If you’re tired of keeping up with FINRA’s ever-changing regulatory landscape and facing harsher and more public sanctions, perhaps it’s time to consider going independent. Becoming a registered investment advisor (RIA) or starting an RIA firm puts you in control of your brand.
If you’re looking to start your own RIA, look no further than AdvisorLaw. Our team of certified compliance specialists leverages its vast experience in the regulatory space to ensure that your RIA is properly registered and in compliance with SEC or state regulations. Learn more about our RIA setup, registration, and ongoing compliance services here.
6. Always be transparent.
Be prepared to discuss the events that led to your termination or recent departure. Firms are already putting themselves at risk by hiring an advisor whose termination disclosure lists anything other than a voluntary termination, so make sure you are as straightforward and honest as possible. Don’t forget to collect and provide any required relevant information to the hiring firm in a timely manner, prior to the interview.
7. Don’t expect to get a big transition deal.
It’s common industry knowledge that there’s money on the table during an advisor’s transition to a new firm. But does that still ring true for the terminated advisor? Unfortunately, any advisor who was terminated for a reason other than “voluntary” shouldn’t expect to get any big transition deal. Yet as always, every case is different. You may be able to come out ahead, depending on the size of your business, as well as the cause of your termination. If a firm is unwilling to offer a transition package, it will usually pay for the costs of client transitions and may offer a higher payout or back-end bonus.
While securing extra cash flow does relieve some stress during the transition after a termination, your main focus should be doing everything you can to secure your next position. It’s in your best interest to get your career back on track, as quickly as possible.
Were you recently terminated, or do you have a negative termination disclosure on your record?
If you were blindsided by a termination, believe that one is imminent, or need assistance removing a termination disclosure from your record, AdvisorLaw’s expert counsel can help you navigate through the delicate process.
For a complimentary consultation, please fill out the form below.