Questionable Sales Practices Haunt Fidelity


Fidelity Brokerage Services LLC has had trouble retaining some of the most successful brokers in its Private Client Group as a result of questionable sales practices. According to an article in Investment News, dozens of brokers serving Fidelity’s most affluent clients recently left the firm because, even though they were required to obtain certified financial planner certifications (CFP), they were prohibited from disclosing details of their bonus compensation, thereby violating the certification they were required to obtain. In addition, some former brokers claim that Fidelity required them to push proprietary products that were unsuitable for some of their clients.

Fidelity brokers receive approximately half of their compensation in salary (averaging between $90,000 and $100,000) and half in bonuses keyed to customer experience surveys, growth of assets, and managers’ assessments. Of these, growth of assets and manager assessments are weighted more heavily in determining a broker’s bonus.

Many of the brokers claim they were expected to push Fidelity’s proprietary products, and their salaries were, in part, based on pushing these proprietary products ? even if unsuitable ? to various clients. Although this practice was in conflict with the CFP standards of conduct, the brokers stated that they were threatened with unemployment unless they both got the certification and pushed proprietary products. A Fidelity spokesman claims that all products are treated equally for the purposes of compensation at Fidelity, but the brokers say that is untrue.

Some of the proprietary products the brokers were allegedly pushed to sell included Fidelity’s own life insurance products, particularly annuities, and Portfolio Advisory Services, a program managed by a Fidelity-run registered investment adviser that invests in Fidelity mutual funds or a mix of proprietary and external mutual funds. One representative, asking to remain anonymous, stated that he had to hit roughly 80% of his sales target in the Portfolio Advisory Services program and annuities to qualify for the investment part of the manager bonus and to avoid a letter of warning about employment. Nancy Von Stackelberg, a former broker, stated that “we were told to say we were product agnostic, but a quiet gun was pointed at your head.”

Ms. Von Stackelberg left Fidelity, who sued her for soliciting her former clients. She countersued, claiming that her employment agreement prohibiting her from soliciting former clients was invalid because she was put in an “irreconcilable position of conflict” by being required to sell products unsuitable for some clients. These cases are currently stayed subject to the resolution of a related FINRA (Financial Industry Regulatory Authority) arbitration action.

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