FINRA RULE 2243, hotly debated and moving toward approval, will require brokers who are paid more than $100,000 as incentive or transition compensation to provide written notice within one year to clients asked to move with the broker.
Over the past several months, I have been questioned numerous times about FINRA Rule 2243, commonly referred to as the disclosure rule, as to how it will affect the recruitment business and the brokerage industry in general.
A closer look at Rule 2243 shows that a financial advisor must disclose to his clients that he was paid compensation by his new brokerage firm to entice him to leave his former brokerage firm. Most likely, the transition package disclosure will be in the form of an announcement on a client’s monthly statement.
Rule 2243 Will Not Stop Recruiting Wars
As a recruiter, I am of the opinion that this transition package disclosure will NOT stop the recruiting wars that have developed and are on-going between major wirehouse brokerage firms for the past decade and a half.
Why? The compensation the advisor received is compensation spread out over a number of years.
For example, if the advisor was given $600,000 in a transition package and was committed to stay at the new brokerage firm for 9 years, that $600,000 “spread out” is about $60,000 a year.
“High net worth clients” would not view $60,000 a year as “excessive compensation”; in fact, clients WANT their advisors to be extremely successful; transitioning brokers will continue to have honest and frank discussions with their clients regarding their compensation packages.
The demand for top producing financial advisors is only going to get greater and the disclosure rule will not slow down the recruiting wars!