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Criminal, credit, compliance ... criminal, credit, compliance ... criminal, credit, compliance. Say it three times fast if you can, but ignore it at your own peril. Because neglecting the details behind these three background checks-which virtually every broker- dealer will do before consummating a deal with a new recruit-will turn your visions of upfront dollars into a mere mirage.
When a broker changes firms, the NASD and the relevant states review the candidate's license as if it was new. That means looking at the details of anything criminal in the adviser's past, as well as any prior customer complaints appearing on his permanent record- regardless of the sums involved or how long ago these activities occurred. In effect, brokers are forced to re-examine problems in the past that they'd just as soon leave there.
In addition, brokerage firms now routinely check the credit of their prospective hires. Brokers are professionals responsible for the caretaking of the finances of others. If an adviser has excessive credit card debt or an unexplainable bankruptcy, regulators assume that he will be generating fees and commissions for his own benefit and not for the client's.
As a headhunter, I'd like to tell you that I've seen it all. But it's not so, because every month brings a new surprise. The following anecdotes, provided with the help of my vice president, Jordan Schultz, are true stories from The Headhunter Files. We've selected two cases for each background check option: criminal, credit and compliance. See if you can accurately predict whether the result would be a deal or no deal. The answers are at the bottom; names have been changed to protect the guilty.
Criminal
George is a 45-year-old adviser with a regional firm. He's looking to move to another regional in the same city. Producing about $400,000 per year, George is considered a pillar of his community and a solid citizen who can attract other brokers...