Robert Spence works in the financial sector as a broker/dealer. When the company that employed him was acquired by a larger firm, he transitioned to the new organization. At the time, the company policy held that individual investments had to stand on their own merits, have full quality oversight and complete transparency. When, in 2006, Robert began to question a clear shift away from these standards, his loyalty, commitment and competency were challenged.

What follows is an overview of the serious issues he discovered as well as thoughts toward a solution. In a business sector where trust has been eroded, Robert’s document reads like a rough draft of a Magna Carta of ethical change.

I believe the financial industry as a whole has failed our country. Our nation and in particular our financial industry has been in turmoil and was very near collapse. In these seemingly unprecedented times came denial, disbelief and a self-serving desire for survival. In this frenzy of survival people lost sight of why they were in this business. We lost our ability to empathize and we lost sight of how to place another’s interest ahead of our own.

How did we get into this mess?

Greed, arrogance and forgetting whose money we were entrusted with got us into the trouble we face today. The subtle erosion of our values, the subtle numbing of our morals (by saying everyone else does it) compounded the trouble we face today.

There is not a day that goes by where you do not hear of some financial scandal. This industry has created a place where a financial advisor (F/A) has a reputation that is purely self-serving. Greed ran rampant, greed not to serve the common good but a selfish greed that served one side and one side only. Conflicts of interest ran rampant.

The very economists that advised our nation, our presidents, our students and our Federal Reserve members were being paid by the very people that took our nation down. Who owns what was hidden in shell corporations. In the world of Broker Dealers (B/D’s) some Broker Dealers became “Managing” broker dealers where they pushed their managed assets down Financial Advisors’ throats. Parent companies who owned B/D’s pushed their products through them. Money and a “pay to play” mentality became the criteria of many a Broker/Dealer’s due diligence. Sponsors of product that investors invested in paid “independent due diligence attorneys” to approve the very product that they offered through the B/D’s to the investors.

The pressure for better and better returns  pushed companies to take greater and greater risks. Then, if an employee dared question their company’s tactics they were branded as being disloyal or worse yet a saboteur of their own company! We now exposed those very investors whose money we were entrusted with to risks that not even a gambler would take.

Unfortunately these cozy self-serving relationships just added to the distrust the nation had in our financial institutions. Banks betrayed their clients as much as financial institutions betrayed their investors. No one was accountable and blame lay everywhere but at the feet of those most responsible. The sad part about all this is that B/D’s forgot how to serve their F/A’s and F/A’s forgot how to serve their clients. As intimately as a Financial Advisor is expected to know their clients a Broker/Dealer should know and understand their F/A’s.

What is the solution?

The Broker/Dealer (B/D) is the gateway to product for our Financial Advisors and from the F/A’s to the investing public. The B/D has the power to approve or not approve a product. Yet, first this business has to have a vision, a moral compass by what to steer from.

I realized that most Financial Advisors could not tell me the vision or the mission of their B/D. I began to realize how important a vision was. A vision is what binds us together, a vision is a reminder of where we came from and what we are here to accomplish. Through this vision we would create a mission statement. Then this mission statement must not be a document that is to be buried in some draw or forgotten on some wall. This mission statement must reflect who we are as people and by extension,  who we are as a company. This mission statement must be our promise that we never forget who we are or how we came into being. A mission statement is the map for all to follow. Without this map we will lose our way.

Investor comes first: What is more intimate than handling the life savings of a client? Behind every dollar is, a grandfather, grandmother, mother, father, son, daughter, relative, spouse, partner and friend. We have been entrusted with the hard earned money of others. We must never forget whose money it is and we need to always treat it with reverence. We are in the business to serve the investor/client. We need to try and mitigate risk as best as possible and we need to remind ourselves daily, is what we are doing in the best interest of our investors/clients.

Our team: I have dreamt of a moment in time where people who genuinely like each other can get together and change the world for the better. A business made up of people who share the same passions; people who believe in each other; people who are transparent to each other and people who truly wish their business partners all the success in the world. A business where one’s title dictates responsibility not arrogance, where leadership is defined as serving others, not oneself, where giving of ourselves to others is our highest ideal.

Trust: In order to foster an environment of trust and team work we have to be totally transparent in all we do. Strength is transparency! Our due diligence process needs to be totally transparent and void of conflicts of interest. Every Financial Advisor needs to understand the due diligence process; how sponsors were selected and what each sponsor had paid to attend our conferences. We must remove all doubt of potential conflicts of interest. Items such as the following need to be addressed: Do any of the sponsors we represent have ownership in us? Does the Broker/Dealer generate greater profits by sponsoring one product over another? Are we managing any of the products we are sponsoring? Are we only approving or promoting those sponsors who pay the most to be at our conference?

Our Financial Advisors: Who is the client of the Broker/Dealer? Our advisors are! We need to support not hinder our financial advisors. We need to be intimately aware of all the rules and regulations governing our industry so we can protect all of us from potential harm. We need to understand our clients and their business as intimately as they understand their investors. We need to help our F/A’s by giving them the tools they need to be as successful as they can be. We need to be a source to our F/A’s for any significant changes to this industry. We need to be adaptive and creative to new ideas so that our F/A’s look to us as being integral to the success and protection of their business. We need to create a team of F/A’s who believe in our vision and who are willing to share their expertise with others for the success of all.

Compliance: We need to be 100% compliant. Our compliance department must be aware and knowledgably of all rules and regulations governing our industry. Our compliance department is our first line of defense and they must be truly unbiased and free of any conflicts of interest when making recommendations and creating guidelines for the B/D. At the same time our compliance department needs to understand that they need to be solution providers, whilst being compliant, to our F/A’s as well.

Education and support: Meetings with reps and sponsors would be done in an educational format and our total focus would be in helping our team on how to grow their business, how to market and how to educate their clients. This Broker/Dealer would be a resource and a support to the financial advisors who are part of our network. We need to ask ourselves this question: What value add can we bring to each one of our clients so that they can become the best they can be?

A measurement of success: If we grow by referrals alone, then I will be content!

So with that in mind I have this mission to change and create nothing less than a revolution in the way the Broker/Dealer community does business. We can either lament what is going on or we can create change.