FINRA recently announced a multi-million dollar ad campaign to increase public awareness of BrokerCheck, in an effort to increase the number of investors who actually use it. I had a few initial thoughts.
First, as I have observed before, it is hardly a secret that BrokerCheck does not serve as the basis for the vast majority of investors’ decisions regarding who will handle their money. For the most part, those decisions are still based on word-of-mouth recommendations and referrals from existing, satisfied customers. Same as it works for insurance salesmen. Same as it works for suit salesmen. Same as it works for attorneys, for that matter. When people are pleased with a service-provider, they like to spread the word. (Of course, when people are displeased, they like to spread the word even further. Just take a look at Yelp, or TripAdvisor, if you want to see just how vocal, and colorful, consumers get when they believe they have received poor service.) Thus, while this constitutes a noble effort on FINRA’s part, it seems rather unlikely that this campaign will have much of an impact.
Second, putting to one side the issue of whether or not it makes sense for FINRA to spend any money to publicize BrokerCheck, in light of its limited utility, I also doubt that the amount of money that has been earmarked for this campaign can possibly achieve much. Last month, I couldn’t watch anything on TV, or read any newspaper or magazine, without being urged in one fashion or another to go see the new Mad Max movie. (Ultimately, I went, and it was excellent!) But ad campaigns of that magnitude don’t cost millions, they cost tens of millions. If FINRA is serious about successfully broadcasting the potential benefits of using BrokerCheck, the relatively few ads it can place with its budget will not make any difference.
Third, I read somewhere that even if BrokerCheck is forcibly waved in front of every investor, members of the Claimants’ bar are still unhappy that BrokerCheck does not reveal everything contained in CRD. Things like exam scores, for instance, which are visible if one has access to CRD, are not contained in a BrokerCheck report. The author of the article was arguing that without access to “essential” information like exam scores, BrokerCheck was inadequate as a tool for investors. I found that to be an amazing proposition.
Registered persons live in the most transparent world of any profession. You can’t go on-line to see how I scored on the LSAT, or the various bar exams I had to take to become a practicing lawyer. You can’t look up how many times it took the driver of your child’s school bus to get his driver’s license, or the pilot of your plane to get his pilot’s license. You can’t easily learn where your doctor graduated in his or her class. Yet, somehow, life goes on, and we all manage pretty well. But, when it comes to registered representatives, attorneys who make their living suing brokers and broker-dealers continue to advocate that investors are somehow being cheated, that they are robbed of their ability to make informed decisions, because BrokerCheck doesn’t reveal the scores that brokers received on their Series 7, Series 24, etc.
It is a patently absurd argument. Nevertheless, I would not rule out the possibility that, someday, FINRA caves to the pressure. Because, historically, that is what FINRA does. Already, FINRA has proposed a rule presently before the SEC – a watered down version of an earlier proposal – that would require BDs’ webpages to have a direct link to BrokerCheck, to make it absurdly easy for someone to take the 90 seconds or so necessary to look up their broker. Is that really necessary?
I remember hearing a comedian riffing on the spiel that flight attendants give before each flight about the location of the exits, the oxygen masks, etc. He highlighted the part where they talk about how to operate the seat belt, you know, insert the flat metal tip into the buckle, etc., etc., and asked – rightly so, in my mind – whether anyone who didn’t already know how to work the seatbelt should be flying in the first place. Is it much different with investors? The relationship between a broker and customer is most definitely a two-way street. Sure, the broker has a number of statutory and regulatory duties to the customer, but, conversely, the customer has his own duties, as well: to provide complete and accurate information about finances, investment objective, risk tolerance, liquidity needs, time horizon, etc., when opening an account; to read agreements before signing them; to open mail when it comes in, such as confirms or monthly account statements, and read them for accuracy (gee, just like a bank statement!); to ask questions if something isn’t understandable. If, however, an investor can’t figure out how to navigate to BrokerCheck without being personally guided there, one can only wonder whether such an investor has the capability of fulfilling his duties as investor. If I was a registered rep, I would think long and hard about entering into a client relationship with someone who couldn’t figure out BrokerCheck on their own, or buckle their own seatbelt, for that matter.