Compliance constraints too onerous for some

Nov 14, 2005 @ 12:01 am

By Brooke Southall

SAN FRANCISCO - She is but a solitary breakaway broker, but Mary Ann Lambert may represent the other side of the compliance coin in terms of where financial advisers decide to set up shop.

Some independent advisers want to become part of a larger firm rather than face compliance issues on their own.

But Ms. Lambert, a 14-year veteran of Smith Barney, left in July precisely because complying with its regulatory dictates had begun to interfere with how she lived her life. She set up shop in Philadelphia literally down the block from her former broker's offices.

Ms. Lambert now manages $100 million as senior managing director of USF Advisors LLC, a Sugar Land, Texas-based brokerage/registered investment adviser firm set up to attract top-notch Wall Street brokers.

"I couldn't breathe, and I was afraid it would affect my clients," she said.

Her sense of suffocation became acute when the New York-based wirehouse took issue with how Ms. Lambert volunteered her time. "I could not be on the finance committee of my church, because they opined I had control of an outside account," she said.

Smith Barney spokeswoman Kimberly Atwater declined to comment, citing the firm's policy not to discuss departing employees.

But the firm's policy with regard to compliance became unbearable after it erred on the side of presuming the worst about its brokers, Ms. Lambert said.

"Firms have to create a compliance culture that plays to the least common denominator of the advisory business. That means that high-end advisers are subjected to as severe constraints as a $200,000 revenue stock picker in a small town," said Steve Graubart, chief executive of US Fiduciary LP, the parent company of the firm that recruited her. "The compliance restraints are a significant reason people are leaving [wirehouses]."

It has become one of the top two reasons, said Paul Lally, an executive recruiter of high-end financial advisers for D.A. Kreuter Associates Inc. of Conshohocken, Pa. "The advisers I represent are businessmen, and you're affecting their ability to do business," he said.

Another adviser who US Fiduciary expects to join soon from a wirehouse also moved for compliance reasons, said Elliot Weissbluth, president of USF Advisors.

The adviser had selected Raymond James Financial Services Inc. but then learned that the St. Petersburg, Fla.-based broker-dealer wouldn't allow him to publish a newsletter, even though NASD of Washington had approved it.

"There would have to have been something unusual with respect to this particular submission," said Don Runkle, chief compliance officer at Raymond James Financial Services. "It is extremely unlikely that either we couldn't have found a compromise or that any changes we might have required would have been a deal breaker," he said.

Ms. Lambert said that Smith Barney was even stricter with the letters she tried to send her clients, not allowing her to use terms such as "mutual funds" and "Monte Carlo." "You just shake your head," she said.


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