Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a striking new study from state regulators finding that broker-dealers are drastically more likely to recommend 'complex' investment products than RIAs (from being 2X more likely to use leveraged and inverse ETFs, to 8X more likely to recommend variable annuities, and 9X more likely to use non-traded REITs), raising questions of whether or how the newly implemented Regulation Best Interest will actually change such tendencies or not (which NASAA is preparing to measure with a follow-up study in early 2021).
Also in the news this week is news that FINRA is preparing new Regulation Best Interest guidance as initial broker-dealer exams reveal where firms are doing well and where they're still struggling to implement, and a new industry study that finds the Department of Labor's 2015 fiduciary rule really was reducing the cost of annuity products for consumers while not limiting access to financial advice for small investors (at least for the limited time window it was in effect before the product manufacturing and distribution companies successfully sued to have it vacated anyway).
From there, we have several articles on the ongoing rise of new lower-cost annuity solutions, including a fresh look at how Single Premium Immediate Annuities compare to bonds in today's low-interest-rate environment, when it pays to wait to buy an annuity to avoid 'locking in' today's low interest rates (and how far and fast rates must rise to actually benefit), and how a new wave of no-commission annuities are being developed by annuity companies after a major new Private Letter Ruling last year that allows RIAs to bill their AUM fees from the products directly (but are still struggling with the technology integrations necessary for RIAs to execute annuities in their client portfolios at scale).
We've also included a number of client communication articles this week, from a reminder that helping panicking clients starts with first acknowledging that it's normal to panic during turbulent times (rather than telling clients to 'calm down'), to a look at how Financial Therapy is gaining more and more attention as a complement to (and facilitator for implementing) financial advice in the pandemic environment, and a look at how clients will rarely change their behavior until their advisor understands and helps them to change their own financial stories first.
We wrap up with three interesting articles, all around the theme of how to maintain a cohesive work environment in the midst of what is now becoming a long-term work-from-home world: the first looks at how introducing a "virtual commute" can help us to more effectively transition from our home life to our work life (and back again); the second looks at the techniques that companies are implementing to maintain their office cultures in an online/virtual world (from internal video podcasts to virtual team-building exercises); and the last looks at how technology tools themselves are being reshaped in how they are used to maintain a strong office culture in a world where it's unclear when we'll be returning to our offices (or if we ever will for at least some firms!?).
Enjoy the 'light' reading!
Study Finds Broker-Dealers Selling Far Riskier Investments Than RIAs (Tracey Longo, Financial Advisor) - According to a newly released study from the North American Securities Administrators Association (NASAA), broker-dealers tend to offer a more diverse set of product offerings than registered investment advisers, but, in the process, are drastically more likely to sell 'complex' investment products to clients than RIAs, including a 2X likelihood to recommend leveraged and inverse ETFs, a 7X likelihood to recommend private placements, an 8X likelihood to recommend variable annuities, and a 9X likelihood to recommend non-traded REITs. Other notable results from the study itself included: 15% of broker-dealers utilized sales contests, quotas, or bonuses that were not tied to any specific products (and notably, such product-agnostic contests would not be curtailed under Reg BI) compared to only 1% of RIAs; 18% of broker-dealers accepted third-party compensation from product providers on account of sales/advice to customers (compared to only 2% of RIAs); and 29% of broker-dealers allowed their brokers to use the "advisor" title (and another 14% to use "wealth management" or "financial consultant") even while acting in a broker-dealer (non-advisor) capacity and 46% of those firms had no prerequisites to use the title (e.g., IAR registration). The results were part of a broader conclusion that NASAA found RIAs generally took more conservative investment approaches; were more likely to avoid higher-cost, riskier, and more complex products; and also reported engaging in more robust due diligence, disclosure, and conflict management practices. Of course, these differences are largely reflective of the actual regulatory differences between suitability-based broker-dealers and fiduciary-based RIAs, and in fact, the study was implemented specifically to understand current practices amongst broker-dealers versus RIAs, with plans to repeat the study in early 2021 to evaluate the impact of Regulation Best Interest and whether it materially alters the recommendations that broker-dealers make under the new standards.
FINRA Working On Reg BI Guidance & Mulling B/D Examination Changes (Melanie Waddell, ThinkAdvisor) - With Regulation Best Interest now in place for 3 months, FINRA is gathering information from its initial broker-dealer exams with an eye towards developing new guidance for broker-dealers on the areas they should focus on first/most when it comes to Reg BI compliance. The announcement is part of a broader approach from FINRA, communicated from the start, that it intends to largely counsel and guide broker-dealers on necessary and best practices for Reg BI compliance in the initial year after implementation, rather than immediately move towards enforcement of the still-new rules that firms are adapting to. The new Reg BI examination and feedback process has also been partially disrupted by the outbreak of the coronavirus pandemic, which largely suspended in-person broker-dealer exams, but FINRA has found remote exams to still be effective in many cases, and as a result of the 'forced experiment' is recognizing that many routine compliance examination needs really can be fulfilled remotely (and at reduced cost and hassle for both the regulator and the firms being examined). Consequently, FINRA has also indicated that it may adopt a more "risk-based" approach to broker-dealer examinations in the future, with an in-person higher-scrutiny approach for higher-risk firms and a distance-based virtual approach for low-risk broker-dealers. The end result is that in 2021, FINRA will likely adopt a more blended in-person and remote examination process as it moves towards finalizing Reg BI guidance and beginning to take a more enforcement-oriented approach to ensuring broker-dealers are actually complying with Reg BI in 2021 and beyond.
Department Of Labor's 2015 Fiduciary Rule Made Variable Annuities Cheaper (Tobias Salinger, Financial Planning) - One of the most hotly debated aspects of the Department of Labor's 2015 fiduciary rule was whether investors would benefit from reduced conflicts of interest and lower expenses, or if the fiduciary rule would increase compliance burdens that would, in turn, raise the cost of financial advice and push smaller investors out of the marketplace. And while the Department of Labor's rule never reached the stage of full enforcement - having been finalized but then ultimately vacated by a lawsuit from the industry's product manufacturers and distributors before it took full effect - the rule was in place long enough that the industry had already begun to adapt industry products and distribution for an anticipated fiduciary future. Accordingly, a new study has analyzed changes in the industry's marketplace after the DoL fiduciary rule was implemented... and finds that, in practice, investors did on average benefit when it came to annuity products in a fiduciary world. Specifically, the researchers found that the average expenses of annuities fell by 20bps after the DoL fiduciary rule, while investor risk-adjusted returns were up an average of 92bps, and that variable annuities sold by captive brokers actually cost an average of 25bps less than products sold by more independent brokers, with sales of the highest-expense annuities across the board falling by 43% more than the decrease in low-cost annuities after DoL the fiduciary rule was initially implemented, and insurers increased the availability of low-expense and low-commission products as well. Though notably, it's not clear if the shift towards lower-cost annuities was solely a result of the marketplace becoming more price-sensitive, or alternatively, that brokers were more likely to sell annuities with fewer guarantees (which may also be 'cheaper', but not as a result of lower commissions or costs, and simply that clients were buying fewer guarantees in the first place).
A Skeptic Takes A Second Look At SPIAs (Allan Roth, Financial Planning) - Within the world of often-complex annuities, Single Premium Immediate Annuities (or "SPIAs" for short) are about as simple as they come: the client makes a lump sum (single premium) payment, in exchange for regular checks (either for life, however long that may be, or for a certain specified period of years). Or as Roth puts it, buying an SPIA today is substantively similar to buying a long-term bond with a duration of the rest of one's life. The caveat, of course, is that buying and 'locking in' an ultra-long-term bond when interest rates are at historical lows, with the iShares Aggregate Bond ETF (AGG) yielding just 1.2%, may not be very appealing. By contrast, a recent look at current immediate annuity pricing reveals that a 63-year-old male in the marketplace today could get as much as $456/month for a $100,000 premium (or a cash flow payout of 5.47%), dropping only slightly to $451/month to obtain the product from a top A++ rated carrier, and, in turn, dropping to just $449/month for a minimum 10-year guarantee (i.e., that even if death occurs shortly after annuitization, a minimum of 10 years or $53,880 of payments will still be made). Of course, the reality is that a significant portion of the monthly payout would simply be a return of the original $100,00 in the first place - $386/month for the aforementioned annuity, with only $65/month or $780/year attributable to 'growth' above and beyond. Still, though, when calculated to his approximately-24-year life expectancy, Roth still found that the SPIA had an internal rate of return of 2.3% (thanks in part to the mortality credits that are built into the annuity pricing), which compares favorably to 20-year corporate AAA bond rates (of 2.12%) and also includes a state government guaranty fund to back it (which makes it more comparable to a government bond, which was yielding only 1.13% at the time of Roth's analysis). Notably, though, such SPIAs typically do not include an inflation cost-of-living adjustment (though inflation today at least remains low) and are still less of a payout than the value of spending down retirement assets to delay Social Security (as opposed to allocating them outright to an SPIA). Nonetheless, Roth concludes that SPIAs in today's marketplace can still provide a compelling alternative to at least the bond portion of the retirement portfolio, for those who are willing to trade some additional inflation risk to obtain greater longevity risk (as retirees can outlive inflation-adjusting TIPS bond ladders but cannot outlive the lifetime payments of an SPIA).
Should Clients Wait To Purchase An Annuity? (David Blanchett, Advisor Perspectives) - As is common in times of market volatility, interest in gaining more stability and income security is on the rise... yet in practice, demand for guaranteed annuity income has actually fallen significantly since the onset of the pandemic. The reason for decreased demand for annuities appears to be driven at least in part by the decrease in interest rates, which leaves many investors not wanting to 'lock in' today's interest rates in the form of a long-term annuity guarantee and instead choosing to wait and hope that interest rates (and the associated annuity payouts) will increase in the future. Yet the reality is that waiting to purchase an annuity has a 'cost' unto itself, in the form of fewer years that annuity buyers get to have their guarantees and potential mortality credits begin to add up in their favor. Yet as Blanchett notes, because an annuity pays out over time, those with shorter time horizons may not have as much opportunity to benefit from higher rates even if they do rise, such that the benefit of a rate increase is 50% greater impact for a 65-year-old than a 75-year-old who has less time to receive payouts at higher yields anyway (though this also means younger annuitants are at greater risk if interest rates manage to drift still lower from here). Similarly, younger annuitants (e.g., those retirees 'only' in their 60s and not their 70s or 80s) have more years to accumulate mortality credits by surviving (and also greater risk of mortality tables extending due to medical breakthroughs, which would lower their payouts). Of course, investors who hold on to their money and wait to annuitize also have the opportunity to grow those funds to have more to invest in the future (albeit not growing by much, as a desire to annuitize in relatively few years means still holding very conservative investments). In fact, Blanchett finds that because of these dynamics, AAA yields would have to rise to about 3% in the next 5 years for it to make sense to delay buying an annuity from age 60 to 65, and rise to 6% for it to make sense to delay from age 75 to 80 (though the breakevens are greatly reduced in scenarios where the retiree can and does successfully grow their assets more in the meantime). Which means, in essence, that waiting to annuitize can be beneficial if interest rates rebound and rise... but similar to trying to time the duration of bond investments themselves, it's necessary to be 'right' about both the timing and the magnitude of an interest rate increase, or risk ending out with less long-term yield and benefit than simply locking in what is actually available today.
Annuities Are Becoming More RIA-Friendly (Ginger Szala, ThinkAdvisor) - One of the great ironies when it comes to the use of annuities in the RIA channel is that on the one hand, RIAs have long bristled at the built-in drag of commissions in most annuity products (which RIAs typically cannot accept without a broker-dealer license)... yet, in practice, annuities haven't necessarily been conducive to RIAs getting paid through their own (assets-under-management) means either, further limiting RIA adoption. But with a major new Private Letter Ruling last year opening the door to RIAs billing their AUM fees directly from an annuity (without triggering a taxable distribution for the client), suddenly annuities are able to fit more effectively into the RIA business model as an ongoing allocation option for clients. In fact, arguably, annuities may soon become especially appealing to RIAs, in part, as a means to differentiate from other largely portfolio-only RIAs (i.e., integrating annuities plus investments to retiree portfolios as an RIA differentiator), in part, because RIAs often serve more affluent clients who tend to have longer life expectancies (making the annuity odds somewhat more appealing), and, in part, because mortality credits embedded within annuities can actually look relatively better in a low-yield environment (i.e., a 2% mortality credit on top of a 2% yield 'doubles' the return, while a 2.5% mortality credit on top of a 5% yield would be 'just' a 50% boost from the annuity). On the other hand, because annuities have traditionally been distributed almost entirely and exclusively by annuity agents, the technology infrastructure to support annuities for RIAs is still largely lacking, from tie-ins to performance reporting systems to integrations with RIA trading and rebalancing tools. Nonetheless, as annuity companies continue to retool for a more fiduciary-centric future, a growing range of technology integrations to RIA systems are rapidly making no-commission annuities more feasible as an RIA solution.
Two Words No Financial Advisor Should Ever Utter To A Panicked Client (Hazel Sheffield, RIA Intel) - In recent years, 'behavioral finance' has taken an increased focus in the world of financial planning. Yet the challenge is that while behavioral finance is very descriptive of the mistakes that investors make, it's largely silent on any guidance about what financial advisors should do about those client behavioral biases. Instead, the financial planning community is increasingly turning to psychology and the world of "financial therapy" to understand how best to actually communicate with, understand, and actually help clients who are struggling with a surge of emotions during volatile markets. Financial planner and financial therapist Brad Klontz has found a number of ways to incorporate the combination into his own $300M RIA, including: recognize that panic is actually a normal human response and accordingly communicate to clients that it's OK to feel panic... the key is just "don't panic about panicking" that can lead to drastic solutions; consider a form of 'exposure therapy' to help clients through volatile markets before they're volatile by engaging in "worst case scenario" exercises where clients actually walk through "what would happen if the markets crashed and stayed down for a while" (helping clients to think through next steps and realize that they can manage the situation if they have to, and that it's usually not actually a life-or-death situation); help clients see the long-term context of volatility (as with a wider frame of reference, the dips literally don't look nearly as bad); consider encouraging clients to engage in mental accounting by separating out their stock, bond, and cash returns, so they can see that their stocks may be down but their cash is stable, and their bonds may actually be up (even if the overall portfolio is down, seeing that their bonds are up can be an important comfort and an identified source of funds to tap during scary markets); and whatever you do, don't tell clients to "calm down" when they're facing panic, as it both demonstrates a lack of empathy for what they're going through, and can even undermine the advisor's credibility by trying to deny that anything is happening when clearly something is happening if markets have declined precipitously!
The Financial Therapists Helping Wealthy People Cope With Change (Madison Darbyshire, Financial Times) - When the dot-com bubble burst 20 years ago after a nearly two-decade bull market, the stress and fear (and, in some cases, outright depression or even suicidal feelings at severe market losses) resulted in an uptick in investors seeking help from psychologists and wanting to talk about... money. Yet, in practice, "finance" wasn't historically part of the training and education in the world of mental health practices... and in the years since, it has spawned a new movement now increasingly known as "financial therapy" that is designed to help people cope with their emotional relationship and challenges with money. Today the Financial Therapy Association has 347 members, its own Certified Financial Therapist educational program, and is seeing more demand than ever in the midst of the stress and volatility of the pandemic environment. At its core, financial therapy emerged from the realization that people can't navigate their way to rational decisions about money when their existing emotions, attitudes, and beliefs are getting in the way... and that navigating those challenges is not necessarily the domain of traditional financial advice, per se, but more akin to the tools of psychology and therapy to help clients work through challenges. In fact, while some who focus on financial therapy are financial advisors adopting a broader approach, others come from the world of counseling and work hand-in-hand with financial advisors to help clients arrive at their desired goals (and actually be able to implement the advice to get them there). And the demand for financial therapy appears to be on the rise with affluent clients in particular, who are 'uniquely' impacted by the pandemic in ways that other crises may not have impacted them in the past (due to the fact that health issues affect everyone, regardless of wealth), and may struggle because few understand how someone with millions (or even $10s of millions) in wealth could still be depressed over their money fears and a drop in portfolio value or overall wealth. Yet the reality is that emotional turbulence and fears about money are relative, and thus can transcend any particular wealth level... and in situations like large inheritances, additional wealth can actually amplify the emotional stakes and make financial therapy even more relevant.
How Stories Drive Financial Behavior -- And What To Do About It (Sarah Newcomb & Samantha Lamas, Morningstar) - The world is a complex place, and one of the ways our brains are wired to make sense of it all is to weave our experiences into stories, which help to filter out the irrelevant and focus our attention on what matters the most. In turn, we also share stories with others, providing the opportunity to learn from one another's experience and formulate a strategy about how we would handle such a situation if the story were to ever happen to us (based, at least in part, on what did or did not work in the version of the story that was told to us). The significance of this is that if we hope to help someone change their behavior for the better, or not succumb to past mistakes, it's not enough to simply suggest an alternative path... instead, it's necessary to provide an entirely new story they can adopt that leads them to the new conclusion. In fact, Newcomb and Lamas suggest that as a starting point, it's crucial to understand a client's major financial/money stories that have already shaped them (and may be subconsciously driving their decisions already), asking questions like "what have been the major financial events that you think have shaped your life the most?" and "when you think about difficult financial times in the past, how well have you 'bounced back' financially and/or emotionally?" By going through this process, we may be able to spot key themes to the client's stories, such as whether they're "contamination" stories (e.g. "I was going along just fine, then BIG UGLY THING HAPPENED, and it contaminated my life. Now things are not what they could have been as a result.") or "redemption" stories ("I was going along just fine, then BIG UGLY THING HAPPENED, and it forced me to grow and evolve. Now, I’m a better person and my experience adds to my uniquely valuable perspective."). As notably, both story types have the same lead-in... but arrive at different endings. This creates the opportunity for the financial advisor to then ask "Imagine a time traveler (alien, angel, or other) appeared to you and told you that this exact financial situation becomes one of your proudest transformative moments. How would you imagine that playing out?" or "If you knew this moment was the opportunity to make one major change to your financial life, what change would you make?" Which gives the client a different story, a different strategy to arrive at the conclusion of the story... and may be significantly more likely to help them actually change their financial behaviors for the better.
Adding A 'Virtual Commute' To Avoid Burnout While Working Remotely (Jason Aten, Inc) - One of the biggest challenges that emerges in a work-from-home environment is the blurred boundary between work and personal life, both in the physical spacing (e.g., when workspace and home space overlap), and also in the lack of transition between the two (in a world where we no longer have the 10/20/30+ minute commute where we go from one to the other and back again). The end result is that, according to a recent Work Trend report from Microsoft, 1/3rd of remote workers say the lack of separation between work and life is negatively impacting their well-being, 30% of information workers say the pandemic has increased their feelings of burnout, and on average people are spending 25% more time working than they were pre-pandemic (as a result of being unable to fully separate and 'turn off' work that has followed them home). The alternative that Microsoft itself is now trying? A "virtual commute", where you set aside 20 minutes at the beginning of the day to take a walk, or simply some quiet time, listen to music or a podcast, and think about the work you need to accomplish or the conversations you need to have for the day... the mental processing that normally occupies our commute time. In fact, Microsoft Teams is actually adding a "virtual commute" feature to its software, including add-ons and prompts for other things that can be done during the virtual commute time (e.g., a partnership with meditation app Headspace). The key point, though, is simply that when work and life blend together more in a work-from-home world... there's nothing wrong with re-introducing some deliberate space and separation back between the two!
The Brilliant Ways Companies Are Moving Office Culture Online (Christopher Littlefield, Forbes) - With the pandemic looking increasingly likely to stretch well into 2021 and no longer just a 'temporary' workplace disruption, more and more businesses are beginning to adapt themselves to a work-from-home long haul, where working from home isn't just a short-term reprieve from the in-office workplace but a sustained alternative. Which, in turn, is changing the culture of many organizations that historically relied upon their in-person office engagement to shape that culture. So how do firms maintain their culture in the new online environment? Some firms have begun to adopt more firm-wide memos or even virtual town halls, and one has even launched its own internal video podcast (recorded as a 15-minute video Zoom meeting) that runs every Monday, sharing updates from the CEO about the health and state of the business, and interviewing team members about what they do and their unique contributions to the company, in order to both keep employees informed and also give them opportunities to meet and better understand their teammates in a world where such interactions can no longer happen in the hallway. Another business is bringing together its team members for virtual meal events, transitioning what was once a "Fun Food Fridays" program in their in-office environment to virtual themes where everyone brings and shares their own creations (e.g., "Between Buns" where everyone shares their most creative sandwich ideas, takes pictures, and posts them to a dedicated family Slack channel, where other team members and their families get involved as the judges to vote and select the winner). Another firm that had more of a video-game culture now runs weekly game nights with popular console games like Counterstrike or Halo. And yet another firm created a "Stretch Summer Program" where every Friday at 3 PM a team member shares a fun unique experience they had with others. The key point, though, is simply to recognize that the physical office environment is highly conducive to impromptu creative collisions that rarely happen in the virtual world... which means if companies want to move their culture online, they have to more proactively schedule a regular program to create those meaningful opportunities for connection (that ideally, team members are excited to show up for!).
Remote Work: How To Build And Maintain An Office Culture Without An Office (Alexandra Samuel, Wall Street Journal) - The culture of a business permeates everything it does, from the moment a new employee starts or is even interviewed, and sees whether it's an office where everyone wears suits or T-shirts, whether colleagues tend to stay fixed at their desks or regularly gather to chat informally, and whether management is very top-down or more collaborative. But in a work-from-home environment, so many of the visual and interpersonal cues of the office culture are no longer visible, which, at best, leaves new team members uncertain about the norms of the business culture, and at worst can undermine the stability of the culture itself. For instance, historically a new team member can learn a lot in meetings by seeing the body language of both the team and its leadership (which also supports conversation by providing visual cues when someone wants to add a comment to the discussion), and from the chit-chat that often happens in the minutes before a meeting gets underway; in a virtual environment, this may mean taking a few minutes at the top of each call simply to let everyone share how they're doing, asking people to share what's happening in their home/personal life, or even a 'weekly show-and-tell' where each person on the team can share something they've learned with others. Other key elements to consider include: when everyone is suddenly accessible 'all the time' via virtual/digital communication tools, the use of 'Do Not Disturb' and 'out-of-office' messages become important to create clear boundaries between work and personal time; it's important to set explicit expectations for how quickly someone should respond to messages and how often they should check for new messages (to reduce the pressure to feel glued to Slack/Teams/Yammer); consider creating an 'Off-Topic' channel to provide a space for non-work-specific workplace chatter; and be conscious of the need to create more group activities for team members to bond, which could be a virtual program, an online game (e.g., team Scrabble or board games?), or even an in-person small-group (and thus conducive to social distancing) get-together. The key, though, is again recognizing that in an in-person world, office culture happened and more easily propagated naturally (when it was easier to pick up on the in-person and visual cues), while in a virtual world, leaders must be more cognizant to directly craft their online culture to become what they want it to be!
I hope you enjoyed the reading! Please leave a comment below to share your thoughts, or make a suggestion of any articles you think I should highlight in a future column!
In the meantime, if you're interested in more news and information regarding advisor technology, I'd highly recommend checking out Bill Winterberg's "FPPad" blog on technology for advisors, and Craig Iskowitz's "Wealth Management Today" blog as well.
J.R. Robinson says
RE: B-Ds Selliing Far Riskier Investments
The information presented in the article by Tracy Longo in Financial Advisor magazine is both incaccurate and misleading. As a point of clarification, any financial planner (CFP or SEC-registered) who wishes to sell variable insurance products (e.g., variable annuities or variable life) MUST have a brokerage license. The reason this is relevant is that the article insinuates that the lowly brokerage reps are the source of the consumer misconduct issue. As someone who has taken a deep dive into financial advisor misconduct research, I submit that brokerage reps are not the source of the problem.
In fact, the vast majority of financial misconduct as recorded on FINRA Broker Check and SEC IAPD is not from B-D registered reps, but rather from dual-registered advisers. In examining the misconduct data, pure (i.e. not dual-registered) brokerage reps seem to have the lowest incidence of misconduct, followed by pure investment adviser reps of RIAs. Among the dual registered reps, more than 80% of FAs with misconduct carry insurance licenses. Among CFPs with misconduct, roughly 90% have insurance licenses. The latter makes intuitive sense since the American College is heavily biased toward the insurance industry and is the #1 provider of the CFP prep program.
Additionally, there are legions of CFP insurance agents who are not registered with either the SEC or FINRA but who sell complex fixed insurance products such as index annuities, UL, and whole life, and SPIAs, and DIAs, which do not require securities registrations.
Interestingly, in my review of financial advisor misconduct data, insurance and annuity sales do not seem to be disrporportionately represented (this was a surprise to me). Unauthorized trading, misreprentation, fraud, breach of fiduciary duty, and the sale of illiquid unregistered investment products (non-traded REITs, Oil & Gas LPs, and private equity) all seem to be represented well in misconduct allegations.
In sum, I believe it is inaccurate/misleading to suggest that brokerage rep sales practices are the biggest source of misconduct toward consumers. The characteristics most associated with misconduct seem to be insurance regsitration, dual registration and the CFP designation.
I am happy to provide raw data to support my posistion.