Compliance isn’t Science

The rules on compliance engagement with the public can seem arbitrary and subjective.

My overseers used regulatory guardrails like a prison cell to isolate me and other insurance producers. And more to the fact, they had no facts as they gutted our advertising and client communication on insurance products and their related topics.

​I was raised in the pre-Vatican II era of the 1950s, spending part of my childhood in a parochial institution. Structure framed my daily life, which was regulated from the time I was awakened by Sister Lucette at 6 a.m. until I went to bed promptly at 8 p.m.

My young life was formed within rules, etiquette and behavioral expectations. I never questioned authority. I actually embraced the absolutes and moral certainty of my surroundings, which later evolved into the moral compass I use for direction in my life, meaningful purpose and a tender conscience.

The rules at St. Vincent’s were clearly defined, as were the consequences of breaking them. The etiquette of the era, as a child, was silence until spoken to and the expectations of personal conduct — benefiting a young boy who claimed godliness, love of church and loyalty to America.

Although I drifted from many of those principles during the late 60s and early 70s, I returned to them like the prodigal son, limping home from the experiences and experiments of those days. I returned to the straight and narrow, back to my respect for authority and obedience to the rule of law. I’ve carried those characteristics into my career.

When I entered the financial market through a career life insurance agency, the focus was the sale of life insurance. Back in the day, there was an insurance regulatory body to be sure, but it was more of a backdrop in the theater of life insurance marketing. Early in my career, three major changes occurred that were driven by tax overhauls: TEFRA, DEFRA and TAMRA. But again, sales and marketing weren't impacted in the life insurance advertising and client engagement of the sale of life insurance.

Then one Monday morning at our weekly sales meeting, our sales manager told us we were all going to become security licensed to sell variable products. So I enrolled in the Series 6 license class so I could sell variable products, including (but not really interested in) mutual funds.

The series 6 preparation class was a boot camp gauntlet of regulations that made my life insurance training look like my Catholic kindergarten classes, which was no small feat.

I started questioning my resolve to become security licensed. Nevertheless, I mottled through the course and passed the Series 6 exam. I never liked all the life insurance paperwork I had to fill out, but the compensation was so good that I learned to live with it. But security paperwork was filled with so much legalese it was much more mind numbing. Ah, but that was just the beginning of the woes to come. Then I went to my first mandatory compliance meeting. It was like being dressed down by Sister Lucette on the wages of committing a cardinal sin. I sat their speechless, unable to move as our compliance officer instilled the fear of God on a level that challenged any fire and brimstone sermon I’d ever heard.

Interestingly enough, his title compliance officer took on a military motif for me. He was like a Marine Corp drill instructor. He was dotting every “i,” crossing every “t” and punctuating every phrase with a pontificating judgment that gave a phobia for the SEC. It shook me to the core.

He was pedantic in his delivery and unrelenting in the consequences of noncompliance. He had come down to deliver the Ten Commandments, and I quaked at his presence.

He paused for a moment and then, just when I thought he was done, he collected his composure as if he had gained new strength of purpose. Then he lit into us on strict rules of engagement on client communication and advertising.

Client communication came in two forms: First; the errors, intentional or otherwise, made in written or oral statements. By the time my compliance officer was through I wanted to join a monastery, live in isolation and take a vow of silence. But my compliance officer killed that idea when he said, ”Sometimes, silence is golden, but in this industry it’s just plain yellow.”

He was addressing the second issue: omissions.

Now, we’re liable for leaving out critical material facts. Now, not saying something was a damming as saying the wrong thing. Then he dropped the other shoe. Bam! It hit the floor like a shockwave from an earthquake. He punitively laid out that all forms of written correspondence and oral communication in seminars had to go through compliance for approval.

I was taken aback. I mean, we're in America, land of the free. You know, the liberty of free speech.

Then Stalin, as we called him, continued in his diatribe about how his reviewing and editing of my communications were for my own protection. (To me, it sounded more like sales prevention.) But that actually gave me some sense of solace. Compliance would check my language, make corrections and delete anything that wasn't kosher. Perfect! I wasn’t schooled in securities, so I gratefully acquiesced.

How naive I was.

A few years later, I obtained my Series 7 and 24. I began selling limited partnerships, individual stocks and bonds, but the vast majority was non-FINRA insurance products. But that didn’t matter from a compliance point of view. I was a registered representative and all client communication was required to be reviewed and approved before I could use it.

So, I just saluted the flag and dutifully submitted my non-FINRA product statements to the compliance department. Then my communication submissions began to be returned back to me piecemeal, some approved, some not and others stricken altogether. I’d call the compliance department for further clarity. It seemed to me that they were always dancing around the items in contention, never really addressing the issues. This went on for some time. And then one day, it dawned on me. I saw a pattern developing over a period of years. I’m embarrassed to say how long it took me to figure this out. But I did. Apparently I’m dense.

I identified several key factors that lead me to one inescapable conclusion: The compliance officers I reported to were consistently in their 30s, relatively new to financial securities and knew nothing about insurance products, their tax advantages, their contractual imperatives and human physiology as it related to underwriting.

All these years I had been genuflecting, bowing low and paying homage to these people who lack the basic skill sets and knowledge to assess my non-FINRA insurance product communication.

I had groveled and curtsied to all these compliance officers, who had no clue what I was talking about, but nevertheless made judgment calls on my advertisement language and client communication.

My time sensitive submissions were bottle-necked in compliance as they invented say-nothing responses that never addressed the issues. I was prostrating myself at the feet of people, who were completely vacant and out to lunch on non-FINRA life and annuities.

My overseers used regulatory guardrails like a prison cell to isolate me and other insurance producers. And more to the fact, they had no facts as they gutted our advertising and client communication on insurance products and their related topics.

When live seminars became the marketing rage, it grew even harder. I just wanted to talk about the planning applications of non-FINRA life insurance to my seminar attendees — but I had to submit my presentation to compliance, again submitting my material to someone who knows little to nothing about the subject.

But according to compliance, my approved PowerPoint presentations were not to be used as merely an outline, because you might be tempted to digress or speak in the spontaneity of the moment. They basically wanted a verbatim recital of each slide.

Compliance sent gag orders out against any rabbit trails off the script. It was like a choke hold.

I would gladly stand down from my complaint to submit my non-FINRA advertising and client communication if there was someone at the compliance department who knew what I was talking about. Keep in mind, everything I’m addressing is non-securities.

I’ve conducted thousands of live public seminars, wholesale workshops, radio talk shows, television and HD 1080p video interviews, as well as thousands of tweets, blogs and articles on the Internet. Over 90 percent of all of those communications address non-FINRA insurance products.

Finding a broker/dealer who understands insurance products and marketing to the public has been a 25-year pilgrimage in itself. My relationship with my present broker/dealer is the best of my career. Of course, I still submit my communication to my broker/dealer on all securities, but I have some latitude on non-FINRA product wholesale communications.

The vast majority of registered representatives whose core practice centers around packaged insurance products are simply asking for a compliance officer to be knowledgeable in the products and planning strategies they review. Why is that too much to ask?

Steve SavantSteve is a syndicated financial columnist, talk show host and popular platform speaker. He is also a nationally recognized videographer, content creator and co-contributor to Advisys, InsMark and LifeSpecs. Steve’s videos and content are distributed to over 280 media outlets and 200,000 Twitter users. To contact him visit