An advisor once told us about a charity golf tournament he organized. He wanted to put the name of his firm and the name of his broker-dealer on the golf balls he was planning to give each player. He approached his broker-dealer who dutifully ran it through their compliance department. The compliance department approved the tournament with one caveat; the golf balls needed to include the required disclaimer—all of the required disclaimer.
"It would have completely covered the ball and looked ridiculous," the advisor recalled. "But they said if we hit it into the woods and someone found it, even if it was 10 years later, it would constitute an offer to sell."
We wish it were the only time we heard of such a thing, but another advisor at a different broker-dealer had a similar story. His annual client appreciation dinner was to feature a minor celebrity who would give a speech and take questions afterwards. The advisor wanted his name and the name of his broker-dealer on the pens they handed out so people could write down their questions beforehand. The broker-dealer wanted a disclaimer on the pens, which once again would have covered them entirely, with little or no room for anything else.
Of course, both advisors opted against using their name or the name of the broker-dealer, and for good reason. Doing so would have needlessly raised questions that needn't be raised. And that's the point. Each bit of added paper makes the client wonder what they're signing, why they're signing it and what prompted regulators to require it in the first place. As much as the advisor might explain, it eventually becomes white noise, and clients' eyes glaze over as they robotically sign and initial where instructed. It was a common complaint when The Patriot Act first passed. If every client transaction has to be accompanied by reassurances that the advisor won't launder money to fund insurgent activities—well, the terrorists have won.
In other words, it gets clients wondering, and engenders less trust, not more; which is the exact opposite of what it was intended to do. It is said that the road to hell is paved with good intentions, which relates to "The Folly of Accountabalism," one of the breakthrough ideas in 2007 that was featured in Harvard Business Review. This is a critically important concept.
Every ethical person wants to be held accountable for doing the right thing, but how do you successfully institutionalize something so opaque? It's a question regulators, legislators and corporate America seems unable to answer. As a result, they go overboard, and the outcome is the hyper-regulated and litigated environment in which we now find ourselves. It gives rise to what marketing consultant David Weinberger coined as accountabalism, examples of which are the golf balls and client appreciation pens with which we opened.
