If you are a regular reader of InvestmentNews, you may have noticed that we rarely quote wirehouse advisers by name. It isn't because we don't ask for the names or that we don't want you to know who the advisers are. (And for the record, it it certainly isn't because, as some media skeptics might posit, the quotes are fake.)
The reason why we seldom reveal the identities of wirehouse advisers is that they probably would lose their jobs if they spoke openly to the press without prior approval from their company — approval that rarely comes or, when given, is rarely timely.
I raise the issue not because InvestmentNews cares whether wirehouses make our job easier. To the contrary, even if the major firms were to clamp down harder, we would continue to report developments in the brokerage world fully and fairly.
To be sure, businesses are entitled to impose rules about employees' speaking to the press, especially those companies regulated as heavily as broker-dealers. When I worked in public relations at a major Wall Street firm, one of my responsibilities was to make sure that press inquiries involving the retail system were handled prudently.
To help the firm put its best foot forward, I steered reporters to branch managers, who often became trusted resources among the press. We also knew which producers could speak freely without triggering a lawsuit or arbitration.
Back in the 1980s, however, branch managers were more than compliance officers, and brokers weren't advisers. Customers paid for what they hoped would be sound, money-making investment recommendations.
As the retail business morphs into a delivery mechanism for objective advice, the wirehouse penchant for control seems to echo the old Soviet model.
Just as the USSR permitted elite artists and athletes to visit the West while their families remained under surveillance at home, the wirehouses allow their top advisers to mingle with registered investment advisers and independent brokers at industry meetings.
These organizations know that golden-handcuff deferred-compensation plans will keep defections to a minimum. Meanwhile, they prefer that rank-and-file advisers know as little as possible about alternate business models for the delivery of advice.
The wirehouse control model doesn't appear to be crimping performance. But if the top advisers at such firms as JPMorgan Chase & Co., Merrill Lynch & Co. Inc. or Smith Barney are thriving because of their freedom to do whatever is best for their clients, shouldn't they also be free to speak?
Do the wirehouses' RIAs merit sufficient trust to be allowed to speak freely and perhaps diverge from the party line occasionally? If the firms' answer is, "We trust them, but ...," it is possible that customers eventually may feel the same way.
