Finra Back Pedals On Advisor Bonus Disclosure Proposal

FINRA has just issued a watered down version of it’s controversial broker bonus disclosure proposal.

Under the rule, brokerages would have to send an “educational communication” to investors working with a broker who is moving to their firm. The document customers receive would outline questions they should ask their broker about the compensation and other inducements the broker is getting to transfer to the new firm.

The original plan required advisors who joined new firms to share details of any recruiting bonuses that they received in excess of $100,000. That idea was clearly a non -starter. It would have made financial advisors the first and only occupational group in America to be forced to share the particulars of their income with  clients. The wirehouses, while supporting the proposal in public, probably felt that it would hurt their all important recruiting efforts. Independent broker dealers were vocal in their opposition.

The main supporters of the measure were RIAs who cast the dispute as a consumer protection issue. In truth, they were hoping to bolster their own recruiting efforts by no longer having to compete against hefty wirehouse signing bonuses.

So, like a cat who suddenly finds itself stuck after climbing up a high tree, FINRA opted for a face saving exit.

The revised proposal doesn’t clarify much. What new information are clients  actually getting? Is there anyone in America who changes jobs without financial incentives?  Even clergymen and  those in the non-profit arena get better financial packages when they move. Advisors are top line revenue generators who may choose to affiliate with firms at which they can both get paid  to join and at which they can better serve clients.

Is there something wrong with that?

About Mark Elzweig

I am an executive search recruiter with an inside track on financial advisors, the asset management industry, and Wall Street. My work has appeared in numerous publications including On Wall Street,AdvisorOne, and Fund Fire. Journalists regularly seek me out, so you catch my bon mots in The Wall Street Journal, Research Magazine, Reuters, and more. You can follow me on Twitter @elzweig or you can reach me directly at 212-685-7070 or
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One Response to Finra Back Pedals On Advisor Bonus Disclosure Proposal

  1. Rob says:

    Most of what FINRA is theater. Do they fully compensate clients who legitimately lost money because of a rogue broker or firm? Nope. What have they done lately that really protects clients?
    I hope the public wake up one day.

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