Feeling a little uneasy about commissions.

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heavenskrow

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So my first job out of college is an advisor assistant at a financial advising firm.
After learning the ropes for 6+months and interviewing at other firms recently, that the current company I work for does something I would never reccomend my friends or family members to.
Basically they steal/take 7% commission for Variable Annuities products. So a $400,000 VA purchase equates to about $28,000 vs a fee only firm. In my opinion that is straight robbery….
Not only that but they flip people into other VA products incurring surrender charges for the client whereas they can flip them after the surrender date has passed to waive the fees…..It seems like that is their main source of revenue and keeping the business alive.
I guess my question is according to the Code and Standards, is this ethical? I want to leave this firm bad, but problem is finding another job =p
 
From a code/standards perspective, you can’t be taking compensation in that prevents you from making independent and objective decisions. That’s your call. I’m guessing that at that kind of shop, your comp is probably the least serious standards violation happening.
But good for you to be concerned here. I’d quit if I were you. Not because of some CFA ethics thing, but a fundamental ethics thing. I won’t work for an unethical place, full stop. If only more financial professionals did the same, this industry wouldn’t have a terrible reputation.
 
I’m with geo on this. Start looking for another job. It’s tough but you want to be able to legitimately help clients and sleep at night. Good on you for being concerned and wanting to put clients interests first. We need more guys like you working in finance to clean the industry up.
 
^ +infinity
Get out of there and spread the word of their bad business practices. Enticing clients to incur surrender charges to swap into their own VA is flat out disgraceful. Earning commissions from selling a VA is usually OK because that comes from the issuer, not from the client’s principal. Perhaps their VA’s annual fees are exhorbant?
 
Start looking for a new job, buddy. You’re a new college grad and you’re going to come across a lot of situations (jobs) where your ethics are tested.
Congratulations on landing the job, congratulations on passing a real life ethics question. Good luck on the job hunt.
 
I assume this firm is not a RIA….Definitely not acting as a fiduciary. If so, probably a lawsuit waiting to happen. Run, Forest, run.
 
Ghibli wrote:
I assume this firm is not a RIA….Definitely not acting as a fiduciary. If so, probably a lawsuit waiting to happen. Run, Forest, run.
Click to expand...
If it is, I’d report them to the appropriate regulatory bodies after I left.
 
I work in the life insurance industry … and these guys sound like total scumbags (commissions are pretty standard, but “churning” contracts, especially soon before a surrender period, is a no-no). I’d definitely disassociate if I were you, and report to the regulators (although you are not required to do so under CFA Standards, your local gov’t - or the SEC/FINRA [given that they’re Variable] - may say differently). These kinds of shops give insurance brokers bad reps and should be put out of business.
 
The 2nd part sounds questionable, but on the first part- is a company not entitled to charge what they want? As long as they are upfront about it, they can charge $1,000,000 if they want to. If the customer doesnt like the price, they have other options.
 
^ all mentioned practices seem legit if you insist on the “big boy caveat emptor” philosophy. from my experiences such businesses turn messy pretty fast and heads are going to roll (unfortunately in most cases not of those orchestrating such schemes)
my advice: get out and blow the whistle on them (regulators, media, everyone you know) and you will be the hero of the day. don’t worry about getting a new job too much. if the past is a reasonable indicator of the future (you landed a job already fresh out of college) then new and better opportunities will soon emerge. in the end, there is nothing more valuable in this industry than having a white vest.
 
doenst the gov offer something like 30% of the ‘revenue’ to whistleblowers?
 
Man so the advisor/vice president today told me to pull up historical performance of these mutual funds a client has for 2008 and 2009 to try give a case to have her move out of these funds.
When he saw that some of these funds recovered the losses in 2008 and even gained more than the loss in 2009, he told me to only do a historial performance in 2008……..
is this legal? Def not ethical…
 
you are in a tough spot now. what he demands of you is borderline illegal and as you said definitely not ethical. I can see your conflict, you don’t want to lose your job, but acting as your boss commands may wreck your career in the long run.
as painful as it seems, you will have to dissociate from this firm. If you stay there, they may drag you down when they fall.
I guess your dilemma now is what to do in the following weeks and I can only offer vague advice because I don’t know the full situation.
1) start looking for a new job, maybe even prepare to be unemployed for the interim time (ask your parents for support)
2) seek legal counsel and make sure that if this company falls, which it eventually will, it cannot drag you into this. you are a honest person and you would want somebody like a lawyer to testify that you tried to dissociate from unethical activities right from the start
3) remember that clients come first. if your boss ask s you to go through with his deception try at least to contact the client outside of the office an tell them about the situation in honesty. It is their money on the line and they deserve to know what is going on. Best case, the guy is so happy about learning the truth that he will offer assistance. worst case, the guy will be pissed, confront your boss and get you fired, but you dont want to stay in that place anyway.
4) remember that having a clean slate in this industry is everything. CFAI is no joke. they will shame you publicly on their website if they find you doing something unethical. dont play with fire
I hope this helps. I could give more precise advice if you could give a little more information about your company (assets under management, rough size of the client position in the mutual funds). The above advice apply to situations where there is more than pennies at stake. smaller amounts offer different strategies.
 
Doesn’t CFAI have an ethics hotline that you can call and ask for advice?
 
Your a good guy. You know its wrong. Imagine the client is your mom or dad. What do you do? That’s someone’s parent. Do the right thing.
When you look back on this in twenty years from a position of relative success, how do you want to remember this decision? Is a few months of underemployment worth screwing someone over and living with that for life? Not to me. But that’s your call to make.
 
former trader wrote:
^ Yes, in addition to their sex line. It’s part of their revenue generating strategy.
Click to expand...
L1 Schweser girl (circa 2012)?
 
If you do only as your boss proposes, then you would be lying to the clients/prospects. You know it’s wrong. What is your professional reputation worth? A few hundred dollars? A few thousand?
Stand up for what’s right. Tell your boss that it’s wrong. If he doesn’t listen, then get out of there!
 
I once told my boss (in his boss’ office) that he’d never given me competent, technical direction on a project.
How can this be any more difficult.
Tell you boss that he’s an ass. Do what’s right for your clients. Or resign.
 
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