Ethics Center: Sales & Marketing

White-Hat Financial Advisors: Time to Promote Your Ethics?

The securities industry has been taking it on the chin of late. A recent Reuters investigative report charged that 48 FINRA-member firms have at least 30 percent of their brokers with black marks on their records. This represents 4,600 brokers industry wide and billions of dollars of investor funds, Reuters said.

This comes on the heels of a 2016 paper that found 7.8 percent of all registered brokers had “financial misconduct disclosures,” suggesting potential future problems. The study, conducted by Securities Litigation & Consulting Group, a Virginia firm that supports plaintiff litigation against the industry, was based on an analysis of firms with 1,000 or more brokers.

An earlier study by business professors at the University of Minnesota and the University of Chicago revealed that roughly one in ten stockbrokers have disciplinary marks on their BrokerCheck records, with several large broker-dealers such as UBS Financial Services and Wells Fargo Advisors’ Financial Network (FiNet) appearing to “specialize in misconduct.”

Ouch! In response, FINRA has stepped up its oversight of rogue advisors and of firms that employ large numbers of them. But in the ensuing media coverage, its staff members have appeared defensive and unwilling to share information.

Implication for white-hat financial advisors in the insurance and RIA channels, as well as securities brokers with clean records? That now may be an opportunity to promote your own integrity in your marketing effort.

What do we suggest? If you have a clean disciplinary history with FINRA, your state insurance regulator(s), and state or federal investment advisor regulators, begin shouting that from the rooftops. Here’s are some actions to consider:

  • Develop a list of ethical proof points to use in the sales process. Examples: you’ve never been sued; your BrokerCheck record is clean; you’ve completed numerous ethics continuing-education courses; you’re a member of the Better Business Bureau and of the National Ethics Association (NEA); you’re a member of ethics-oriented industry organizations such as the Society of Financial Services Professionals (SFSP) and, again, of the NEA; you have a code of ethics and privacy policy posted on your website; you conduct extensive fact-finding and risk profiling to assure the sale of suitable products. Consider packaging all your points in a separate document that you provide during initial sales interviews.
  • Disclose information about your background, training and experience, and business processes that go beyond the minimum mandated disclosures. You want to be sure that prospects understand that ethical dealing is hard wired into every aspect of your business.
  • Discuss your standard of care with prospects. If you’re a fiduciary, highlight and explain what that means in practical terms. If you’re adhere to a suitability standard, explain your desire to select appropriate products that also serve your clients’ best interests, regardless of compensation.
  • Expand the number of client testimonials you display on your web site and in your marketing literature (assuming you’re not subject to the investment advisor testimonial rule. When you solicit these statements, ask your clients to explain why they trust you.
  • Use trust icons from the Better Business Bureau (BBB) and from NEA on your website and marketing pieces. Send a strong message that numerous third parties can vouch for you.
  • If you work with a team of other advisors and customer service staff, stress the quality of those around you . . . that they can trust your entire firm to do what’s right.

Finally, in the sales process, do something that will startle your prospects. Recommend they do something that works against your own interests. For example, perhaps suggest they hold off buying more life insurance if they don't need it or put more money into low-cost index funds. The point is, you want to dramatize you're working for them, not yourself.

If you put your ethical commitments at the core of your marketing program—and do so for months and years to come—you will become known as a white-hat advisor . . . unlike the Wall Street rogues who only view clients as funding mechanisms for their trips and trinkets.

For information on affordable E&O insurance for low-risk insurance agents, investment advisors, and real estate broker/owners, please visit For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.