Letter: Financial advisors have no recourse when they disagree with their firms

Re: Article, When you and your firm clash over client communications

Ethical advisors are simply asking for regulatory rules surrounding market commentary that are interpreted and enforced consistently — irrespective of who’s making the comments.

As it stands, the Canadian Investment Regulatory Organization (CIRO) and its member firms are the arbiters of the rules. They interpret them and, most importantly, they enforce them. Imagine a gold medal game where a referee calls eleven penalties against one team and only two against the other. It happens. And when it does, the organization that appointed the referee always has a credibility problem. That’s what CIRO and many of its member firms have right now — a major credibility problem.

In my opinion, there have been numerous occasions when firms have made non-compliant statements and comments. When confronted, they basically say, “Tough. If you don’t like it, there’s the door.” Why is it that advisors must set their careers back by being forced to switch firms when employers act unethically, while the firms (supported by their self-regulatory organization) can say and do whatever they want? 

Here’s a hypothetical question: If a firm wanted to be a jerk and simply pick on certain advisors or groups of advisors, what’s to stop them? What recourse do the advisors have? The industry doesn’t even attempt to offer meaningful dispute resolution in such cases. It just does whatever works best for itself.

In a newsletter, if a firm can say, “We believe in active management,” why can’t an advisor, at a minimum, write to her clients and clarify that she, personally, does not? I know of firms that have put the former in newsletters and then precluded advisors from clarifying to clients that the corporate viewpoint is not shared by the advisors. Isn’t that censorship?

The article noted the importance of “cultural fit” and “a firm that meshes” with an advisor’s investment approach. What if the firm recruited the advisor with a pitch of “independence”? Firms claim to be independent, but when push comes to shove, advisors quickly learn that they are free to have any opinion they want — provided the firm has the same opinion. If the “independent” firm can have one viewpoint, why can’t the firm’s advisor have another?

What, exactly, can and is being done if firms “use compliance as a cudgel to punish advisors who aren’t falling in line”? How many corporate newsletters would be rejected if advisors had to agree with the contents of the messaging? The shoe is never on the other foot. The playing field is never level, because firms have the ultimate discretion to determine what can and can’t be published.

Have your say. Email our managing editor with your comments.

John De Goey

Planning and Advice