Doug DavidoffA client of mine, who happens to be a financial advisory firm, just got word that they’re broker-dealer will not allow them to blog. For those of you unfamiliar with how the financial services industry works, anything that can be perceived as marketing needs to be approved by a compliance department before it can be implemented. In the case of my client, their business (an independent financial advisory practice) must be affiliated with a firm, recognized by the NASD, to provide this type of oversight.
In the response to my client, this firm’s compliance department said that it looked at blogging in the same way it looks at instant messaging, in that it is something that cannot be reviewed in advance.
Now, I work with a lot of financial advisors and I’ve also been a financial advisor myself, working at Merrill Lynch for almost seven years. What amazed me is that a country founded on the principle of free speech and a country that has led the world into the information age, that an industry as fundamental to our economy as financial services believes in this kind of censorship. It seems as though the financial services industry is more concerned about preventing its advisors from saying anything then they are about ensuring that what is said is accurate.
Don’t get me wrong. I understand that there are a lot of people that prey on the innocence and naiveté of the public. The solution, however, is not to stop people from saying anything – it’s to make sure that what is said is accurate. The regulatory bodies and governmental agencies should prosecute the liars, not squelch the flow of opinions.
The financial services industry is in trouble. More and more investors are managing their own money. This is bad for two reasons. First, the vast majority of individuals are not qualified to navigate the complexity of creating and implementing effective financial strategies (it is, if you will, a prescription drug). Second, our economy relies on financial services professionals to keep our markets efficient. As the industry creates less value and chases people away by managing to the lowest common denominator, it makes it more difficult and less rewarding to be a financial advisor.
The rejection of my client’s blog is a symptom of a set of bigger problems facing the financial services industry. Here are a few:
- There is so much money wrapped up in valueless organizations that the industry itself works to prevent competitors with new ideas and approaches from entering. They do this under the name of protecting the public.
- The industry has forgotten that the money that are entrusted to oversee is not theirs.
- The industry, founded on the concept of open and transparent markets, believes that censorship is an answer to the misdeeds of a few.
Here is my recommendation to any fast-growth industry – the more said, the better. Freer access to information and the exchange of ideas is always good for the market – even if it creates some challenges for the status quo.