“All publicity is good publicity.” P. T. Barnum is considered the quote’s author. He was wrong. The news industry has another saying: “If it bleeds, it leads.” Put another way, bad news sells. What do you do when your firm gets into the news for the wrong reasons?

Let us consider three scenarios:

1. An individual is the newsmaker.
2. Your firm is accused of wrongdoing.
3. Your firm makes a decision that gets bad publicity.

Scenario #1: An Individual Is The Newsmaker
We have all seen news stories, often in trade publications, about a bad actor doing something outrageous. In one story an advisor might cheat seniors or take money from a charity in another. Some stories concern wrongdoing in an advisor’s personal life outside the office. Sometimes these stories appear in the local or national press. What do you do?

Start by bearing in mind you do not know the full story. Your firm likely has an official comment. Check that out. You are not going to talk with the press, but your good client might call you up and ask your thoughts.

Years ago, a mutual fund wholesaler made a great observation: “Newspapers do not run the headline ‘A 747 Landed Successfully at San Francisco Airport.” That is not news because it is expected. That happens hundreds of times a day all around the country. Therefore, it is not newsworthy.

According to FINRA, in 2022 there were 620,882 registered representatives in the US. (1) they also report 555 individuals were barred or suspended in 2022 and 663 fraud and insider trading cases sent for prosecution. Assuming these are the “bad actors,” that is 1,218 in total, representing under two tenths of one percent of the total advisor population. Even if you dug deeper and looked at complaints received (11,180), it is about 1.8% of the total advisor population.

As a point of comparison, one in six Americans surveyed admits to lying on their income taxes. (2) That is just under 17%.

Message: There are lone wolves or bad actors in all fields. They represent a very small percentage of the overall population. The vast majority of financial advisors are committed to doing the right thing for their clients.

Scenario #2: Your Firm Is Accused Of Wrongdoing
You have seen the case where a division or even an entire firm is in trouble. A good example is the 2015 Volkswagen emissions scandal when the company was accused of cheating on diesel emissions testing. (3) Dubbed “Dieselgate” and “Emissionsgate,” it was a crisis for VW.  If your firm is in the spotlight for the wrong reasons, what do you do when clients ask about it?

The first step (as above) is to see what the firm is saying. You should also not speak “off the cuff” with comments like “It has been going on for years” because you never know if the person on the other end of the phone is recording your conversation and you are now reframed as “a company spokesman.”

In some ways, your relationship with your client is like a pendulum. There are times when you position yourself as an agent of the firm, part of a much larger operation. Examples are when you are talking about lending services or the specialized advice available for senior executives with control stock and Rule 144 implications. There are other times when, from your client’s point of view, “the firm” is your local branch office or “the firm” is you, as the client’s point of contact.

Problems may have developed in another division or elsewhere in the corporate structure, but you or your branch office were not directly involved. (You must ascertain this is true, of course.) Here’s an example from 1989 and the Exxon Valdez oil spill in Alaska. Exxon had a serious problem. Members of the public started boycotting, no longer patronizing their local Exxon gas station. Exxon tried to get the message out the owner of your local station did not personally strike a reef in Alaska. They should not be held personally responsible by citizens in your local community.

This is the point when you reaffirm the day to day relationship is between you the advisor and the client. You are an agent of the firm, but to the client, the firm is your local office, your desk and you. Assuming your client thinks highly of you and your integrity, this should help.

Looking back at the corporate level, your client might understand mistakes were made, but they would want to know steps have been taken to see the situation does not happen again. Your firm has probably announced steps taken in this direction.

Scenario #3: Your Firm Makes A Decision That Gets Bad Publicity
You have seen this one before. Your firm has internally announced account minimums will be higher. Maybe they decided to raise fees. This information gets out somehow. The news gets sensationalized: “(Firm) Says ‘If You Have Under $250,000 We Don’t Want You.” Maybe the headline is “(Firm) Hikes Fees on Average Investors.” Your clients start calling.

By now, the first step is predictable. See what the firm is saying. Someone has picked this up and put together an official response.

Do not create as “us vs. them” scenario and blame the firm. Do not profess ignorance “I don’t know why they are doing this…” Most clients value loyalty. If they feel you are distancing yourself from the firm when things become uncomfortable, they may assume you will distance yourself from them at a time when they really need you.

Although higher fees might not sound very beneficial, you need to did deeper and find the benefits to the client. The firm might be spending lots of money on a new computer system that will provide real time pricing for clients through a remote application they can download. You might be hiring plenty of new research analysts to cover global markets on the ground. If the firm has raised account minimums, there are usually good reasons too. Certain money managers might have high account minimums. You need more money to get adequate style and size diversification. Put another way, the asset level needs to be large enough for you to demonstrate the value you bring to the relationship.

Bear two other factors in mind: First, the firm is not going to simply “give away” an entire client segment. There will likely be a new channel to service those clients, possibly giving them more attention than they are getting now. Second, you have a voice in the clients you want to handle. Rules like householding enter the equation. Some clients might be grandfathered under old rules.

No one wants to hear bad news. There are ways of dealing with it, allowing you to keep or strengthen client relationships.

(1)  https://www.finra.org/media-center/statistics
(2)  https://www.finder.com/americans-lying-on-taxes#:~:text=Only%20one%20in%20six%20(16,lie%20when%20filing%20their%20taxes.
(3)  https://www.caranddriver.com/news/a15339250/everything-you-need-to-know-about-the-vw-diesel-emissions-scandal/

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” is available on Amazon.