April 17, 2014
Thank you for the opportunity to comment. First, please know that my comments are my personal opinions and not reflective of my firm, or anyone else at my firm. Second, let me state that I have been in the securities business since 1976, and that my current firm does not pay any upfront recruiting bonuses in cash. We may help cover certain expenses of moving a practice, on a reimbursement basis.
It has been my observation that an individual compensation package is freely negotiated between a newly-recruited rep and the new Finra BD, and it is clear that those packages can be structured in any number of ways to either fall within the proposed parameters or to avoid the proposed parameters, especially when one considers salary, bonus, commissions, fees, reimbursements, stock, warrants, options, deferred compensation and retirement plans, and the other numerous ways one can be compensated in today’s workplace.
I have always believed that an individual client will follow a rep to a new company, when the client is happy with that rep, and not because the rep gets paid more or less by the Finra BD. Most people that I know change jobs to get paid more money—that is simply assumed. Most clients are actually happy that a rep will get paid more, as long as the client’s own costs of doing business with that rep are not adversely affected. Although it might seem that clients expect to pay less for investment advice and the investments themselves, even as the cost of providing those services and investments may have increased—I believe that a client will still pay for “good value”, similar to other professions, such as law, accounting, and medicine. In summary, I do not believe that disclosure of a newly-recruited rep’s compensation package has any real effect on any one client’s decision whether to follow that rep to a new firm.
There are numerous federal and state securities laws, rules and regulations, plus self-regulatory organization rules (e.g., MSRB), already in effect that adequately and completely address the issues of churning, suitability, full disclosure of commissions, full disclosure of fees, full disclosure of costs and expenses, and full disclosure of what it might cost a particular client to transfer his/her securities business and follow the newly-recruited rep to his/her new firm. To assume that changing jobs and getting paid more money somehow makes one less honest and ethical as a result, I think does a disservice to the many honest and hard-working men and women in our business.
Neal E. Nakagiri
President, CEO, CCO
NPB Financial Group, LLC
3500 W. Olive Avenue, Suite 300
Burbank, California 91505