They have little tolerance for sexual harassment, but most advice firms lack formal policies

As various forms of high-profile sexual harassment and assault charges have dominated news headlines over the past year, the financial advice business has been struggling with how to address an issue that largely has, until recently, been side stepped.

While most large financial services industry conglomerates have harassment policies that are maintained and managed within human resource departments, thousands of smaller independent firms might not have even considered creating a formal harassment policy.

So, when should an advisory firm introduce such a policy?

“We do not have a formal policy, but there is absolutely no harassment allowed here,” said Carolyn McClanahan, founder and director of financial planning at Life Planning Partners.

The “zero-tolerance” policy was illustrated a few years ago when an office cleaning lady made an unwanted sexual comment to an adviser working at the firm.

“She was fired on the spot,” Ms. McClanahan said. “We have corporate engagement standards, which means if anyone is not feeling right about something, we bring it up as a group and we bring it up immediately.”

Across the financial advice industry, especially among smaller shops, formal harassment policies are rare, but change is in the air.

The XY Planning Network of about 700 registered investment advisers is credited with breaking ground last year by introducing at its annual conference a code of conduct and sexual harassment policy.

Recognizing that industry conferences, which often include cocktail receptions and other social gatherings, can sometimes fuel inappropriate behavior, XYPN co-founders Alan Moore and Michael Kitces addressed the issue by announcing that any form or harassment would not be tolerated and that offenders would be barred from attendance at XYPN events.

“Everyone has a right to come to work and not have someone making unwanted sexual advances towards them. Everyone has a right to say no, and it means no, without explanation. Everyone should be able to be unique, and not be judged for their uniqueness. We are stronger when we are diverse, and we promote diversity at XYPN,” the policy reads in part.

But even with such a policy at XYPN, which was reiterated at this year’s annual conference in October, Mr. Kitces admits he does not have “anything handy for our own RIA,” Pinnacle Advisory Group, where he is partner and director of wealth management.

That is not to suggest that Mr. Kitces or Pinnacle Advisory Group doesn’t take harassment seriously, but it reflects where much of the industry is regarding formal policies versus just expecting people to know what’s right.

“Harassment policies are part of the new regulatory compliance suite, or it should be, and firms need to get ahead of this,” said April Rudin, president of financial services marketing firm The Rudin Group.

“Right now, people are still in reactive mode when it comes to workplace harassment, but soon it will switch to proactive mode as it become more mainstream,” she said. “In some ways, it reminds me of the fiduciary rule, and wondering why you should have to tell firms to put clients first. We still have to tell people how they need to behave.”

Steven Seltzer of The Seltzer Law Group, said the best harassment policies are straightforward and well-communicated to employees.

“A policy must be in writing and it should explain what sexual harassment is, including examples, and what the retaliation is in layman’s terms regarding any action taken to penalize someone who has registered a complaint,” he said. “Many employees fear reprisal if and when they do come forward with a complaint.”

Last month at its annual conference in Chicago, the Financial Planning Association followed the lead of the XY Planning Network by handing out cards at registration highlighting its formal “#MeetingsToo” policy, which plays off the “MeToo” movement that developed in the wake of last year’s string of high-profile sexual harassment charges.

Like the XYPN policy, the FPA appears to be specifically addressing behavior at conferences.

Asked about the “#MeetingsToo” policy, FPA executive director explained that formal harassment policies are “fast becoming a best practice in the meetings industry” and added that the FPA wanted to “put a flag in the ground.”

Considering that nearly half of all advisory firms qualify as solo practitioners, it’s perhaps not surprising that formal policies are not yet the norm at the firm level.

Helen Ngo opened Capital Benchmark Partners five years ago after working for five years at a much larger firm.

Even if policies are in place, she said they are sometimes not clearly articulated, but she also recognizes that conferences are where harassment is most common.

“You hear a lot of interesting stories coming out of conferences,” she said. “The organizations don’t want to get in trouble for not having an obvious stance. All these conferences know they can’t prevent sexual harassment, but if they take the initiative that this is what we believe in, it’s a step forward.”

Amy Irvine, founder of Irvine Wealth Planning Strategies, said she made sure she had a harassment policy in place even before the first employee was hired in 2016.

“Having had experiences at prior jobs, I created a high-level policy, and as I started adding staff members, I reinforced that no type of harassment would be tolerated,” she said. “We can joke with each other, but there’s not tolerance for harassment. I would hope that more firms think about that as they continue to grow.”