Ask Brad: How Broker/Dealers Can Ruin a Rep’s Career

This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.

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In a recent article, I opined on the upper hand that broker/dealers have when terminating their brokers. The terms of those departures, as reflected in the disclosure documents, is similarly imbalanced.

For good reason, broker/dealers must explain when a broker leaves their firm for reasons less than voluntarily. That information can be useful to regulators, future possible landing spots for the broker, and the investing public.

The verbiage provided, often as short as a single sentence, is scrutinized by a broker/dealer before finalizing. It is responsible for fulfilling its regulatory obligations to provide an explanation while being cognizant that the verbiage could lead to litigation.