Too many times in the past year alone, I have been the recipient of a frantic call from a quality advisor who has just been terminated. In almost every case, what started off as a typical day quickly turned into a nightmare—a termination without notice and a security escort to the door. When that happens, advisors find their entire careers and relationships with their clients in jeopardy.
In this new hyper-compliant environment, advisors are often completely unaware that their activities (or those of their team) are in any way non-compliant in the eyes of FINRA or their firm. By the time they find out that what might have been overlooked by compliance departments in the not-so-distant past is now a termination-worthy infraction, it’s too late.
While no one likes to think about it, advisors should know what to do should they get the metaphorical pink slip. Here are five steps you should take immediately if you find yourself in crisis mode:
1. Take a deep breath and gather your belongings.
There will be plenty of time to grieve later, but time is of the essence. Your only goal right now is to get hired by the best firm as quickly as possible.
2. Call a trusted recruiter.
Because time is of the essence—and depending on the severity of the reasons for termination—you will need to be open to considering all types of firms. It is critical to leverage the expertise of someone who is well-connected across the swath of the industry landscape and can arrange meetings for you without delay.
Your recruiter should know what options are most realistic given the size and nature of your business and the reason(s) for termination. He or she will coordinate efforts with legal counsel to move the process forward in a timely manner. This is extremely important, as each day that goes by increases the potential for losing clients. In some cases, depending on the reasons for termination (sales-practice violations being most toxic), major firms may not be able to hire you. And while a firm’s local manager expresses initial interest in you, it may take days or weeks before you learn that the compliance department has vetoed the hire. In addition to meeting with every possible wirehouse and regional firm, we believe strongly that terminated advisors should also open doors with independent broker/dealers, custodians and firms you may have previously considered “second-tier.” A terminated advisor needs as many oars in the water as possible.
Best-case scenario: You took meetings that were unnecessary. Worst-case scenario: In order to salvage your career, you land at one of these second-tier firms. The latter isn’t as bad as you think. Even from a second-tier firm an advisor can successfully service his clients and, most importantly, rehabilitate his career so that at some point he can be hirable again by a firm with more cache.
3. Hire a lawyer.
The firm that just terminated you is legally bound to file public disclosure Form U-5 within 30 days. It will contain the reason for termination and the wording is one of the most important barometers of your future success.
“A terminated advisor should immediately retain an attorney to negotiate the specific disclosure language regarding the basis for termination on Form U-5 before his Form U-5 is filed,” says Barry R. Lax of Lax & Neville LLP, a New York City litigation firm that specializes in the financial services industry. “Prior to the filing, there are many instances where a broker/dealer is open to a recommendation as to the reason for termination and the disclosure language as long as the disclosure remains truthful.”
Make no mistake: This is a negotiation process with a finite expiration date. Once the door closes (i.e., when the firm files the Form U-5 or the expiration of 30 days, whichever comes first), it’s nearly impossible to reopen.
4. With your attorney’s approval, stay close to your clients.
Let them know what happened and that you have always acted—and will continue to act—in their best interests. They need to be assured that their assets are safe and are being monitored in your absence and, of course, that you expect to land elsewhere soon.
5. Create a timeline and personal narrative.
While you wait out what feels like a painfully long 30 days for your U-5 to be filed, you can be productive by preparing your personal narrative—a written description from your perspective of the events that led to the termination. This timeline of events will help your attorney advocate best on your behalf, and any firm considering you will need one along with the Form U-5. Personal narratives are not meant to be sales pitches; they are meant to give a compliance officer an honest account of the facts.
A terminated advisor must take responsibility for his actions. The kiss of death for anyone who wants to be hired by another firm is to act defensively or to blame others. Contrition and remorse are the watchwords. The very best course of action is to acknowledge any mistakes made, explain what happened in an even-handed way, then to send the message, “I have been scared straight, and this will never happen again.”
Should you find yourself being ushered out of the place where you built your career, do not assume this is the end of the road. Navigating this new terrain will require you to be proactive and gather the right team to help you regain control of your destiny. Only then can you ensure that what you built will not be left in ruins, but instead rebuilt in the best way possible.
Mindy Diamond is President & CEO of Diamond Consultants in Morristown, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.
