Jon: What are the most burdensome aspects of paperwork?
Advisor: You would think that opening an account with the aid of today’s technology would make taking on new clients easier but if the people who designed the system and those processing the applications behind the scenes aren’t 100% proficient in their roles, the work grows exponentially for both the customer and the rep. Forms are constantly changing to meet the latest rules and the length of forms is getting insanely long as I reviewed an application to open an IRA account that can run 120 pages or more (applications vary in length with the product vendor). In addition to servicing clients, performing annual meetings and updating client suitability requirements, the home office personnel believe that we serve them and not the other way around. A departure from the way things used to be years ago when home office employees realized we pay their salaries.
Jon: When your two representatives left saying, “It’s not for me” what were the factors that made them conclude this business wasn’t for them?
Advisor: The older of the two advisors that had been with me for over 15 years started to do less and less variable business. The rep started selling more and more fixed insurance business and lost interest in doing products through the broker dealer. He explained, “Doing variable products, I have to work harder to make less money. He didn’t see the point anymore so he left the securities industry. The younger rep was full of enthusiasm at the start and had a promising career ahead of him but he started to wonder whether he had taken the right career path. He clashed with compliance, not that he had done anything wrong, he just couldn’t stand the lack of imagination and people that stood in his way of doing business in a way he thought was better. His passions for life took him to another place with the freedom to do something he’s truly passionate about and has the freedom he was seeking but couldn’t find in this business.
Jon: When your son said he wanted to leave commenting “This industry is too stifling for me,” what was it he found stifling and what will he do as an alternative?
Advisor: My son may have had the makings of a future superstar in the industry and I don’t say that out of nepotism because everyone in the office and my clients who met him, believed he certainly had the potential to excel. After experiencing what he said were such stifling rules on how to do self-promotion, creative marketing, telemarketing, seminars and many other rules and policies that the industry and broker dealer imposed on its advisors, he couldn’t imagine doing this for the rest of his life. He said this industry is behind the times in almost every way. Everything he wanted to try was treated with skepticism and rejected with a “no go”. Where was the freedom of expression in the new world of technology that every other industry seemed to embrace except ours?” He’s still an active Investment Advisor but has begun taking classes to get into broadcasting.
In Conclusion: The advisor’s son is very entrepreneurial minded and seeing so many regulatory restrictions on how he can market himself in spite of technological advancements, became such a turnoff, he wants to explore other career paths that aren’t so stifling. In the book, Defending the Undefendable by Walter Block, Block states, “There is a positive relationship between the amount of governmental interference in an economic arena, and the abuse and invective heaped upon the businessmen serving that arena.” Overregulation is ultimately the death knell of freedom, ergo the death of the entrepreneur. The 17th century Dutch philosopher Baruch Spinoza looked at regulation on a practical level claiming, “He who seeks to regulate everything by law is more likely to arouse vices than to reform them. It is best to grant what cannot be abolished, even though it be in itself harmful. How many evils spring from envy, avarice, drunkenness and the like, yet these are tolerated because they cannot be prevented by legal enactments.”
The financial services industry has regulations heaped upon them, yet advisors determined to do Ponzi schemes, steal from clients, commit fraud etc., don’t follow rules but rather, bypass the rules, while the advisors that walk the straight and narrow path have to operate their business through a mountain of rules, policies, procedures and most of all excessive paperwork that does little to protect the public. The greatest challenge to attracting people to our industry isn’t identity politics issues like equality or diversity, it is candidates having to contend with being in one of the most regulated industries in the country. As the number of broker dealers and advisors continues to shrink, will we have a viable future as President Biden follows the advice of former Senator Ted Kaufman, who’s a champion for more severe financial regulation asking for even more stringent requirements on disclosures and reporting? Financial Services Institute (FSI) will certainly have a busy docket.
Sources: Inc. How Too Much Regulation is Killing the Entrepreneurial Golden Goose by Tim Askew. Fee-People Resent Businesses More in Highly-Regulated Industries 6/30/3030 by Gary Galles. City Journal 1/18/2021 Tax and Regulate
Jon Henschen is president of Henschen & Associates, an independent broker-dealer recruiter and consultant.