Why are so many top financial advisers suddenly being fired for cause?

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The conclusion is preordained. The adviser is terminated for cause –– and in the context of these financial positions, it is a regulatory violation, which triggers reporting obligations. That means they are suspended from working at the bank or anywhere else while the investigation drags on.

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Meanwhile, the bank hopes the clients will remain with them and distributes the list to other advisers. The clients are told that their adviser has been suspended, so they naturally assume the worst and are disinclined to reengage them if or when they are regulatorily cleared to practice again.

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In one case I have, the adviser’s entire team was suspended, even though the team members had nothing to do with what lead to the inquiry. As a result, the connection between the adviser and their clients was entirely severed.

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By the time the process concludes, substantial damage has been done, irreparably and irremediably.

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What makes these cases particularly significant is the nature of the financial advisory business itself.

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Unlike most employees, successful advisers often build relationships over decades. Their value lies not merely in their technical skills but in the trust they have established with clients and the assets those clients have entrusted to them.

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When an adviser is abruptly removed from the marketplace, clients face uncertainty. Some wait. Others move elsewhere. Many simply remain with the institution and are reassigned to someone else.

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This is very different than a normal employee being terminated. If that employee is out of work for, say, eight months, they generally get another job at the same income and can recover those eight months of loss through a wrongful dismissal action. They are made whole.

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But in these cases, because of the nature of the process and the regulatory involvement, financial advisers lose a large portion of their clientele, suffering lifetime losses not only from the clients who moved on, but the ones that would have been referred to them by those lost clients had they not gone away.

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And then there is the signing bonus that any new investment houses would have paid them based on the size of the client book they bring.

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Whether intentional or not, the economic consequences are profound.

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That reality creates a governance question boards should be asking.

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Has the threshold for cause termination in financial services changed?

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If so, why?

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Are institutions becoming less tolerant of risk?

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Are regulators exerting greater pressure?

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Or have internal investigations evolved from fact-finding exercises into mechanisms that too frequently end with predetermined outcomes?

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That is certainly what I see.

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Having acted for financial advisers for decades, I do not recall seeing anywhere close to this volume of investigations and cause allegations against high-producing money managers across multiple major institutions.

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Something has changed.

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The question is: what?

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Dismissal for cause has always been the most severe sanction available to an employer.

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In financial services, however, it is even more consequential: a threat to a professional reputation and book of business painstakingly built over an entire career.

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That is why boards should concern themselves not only with whether investigations are conducted properly, but whether they are appropriately commenced in the first place.

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The integrity of an institution depends not merely on its willingness to investigate misconduct, but on its ability to distinguish genuine misconduct from issues that could and should be addressed through less destructive means.

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Because once an investigation becomes the default response, the damage is done, long before the facts are fully known.

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Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practises employment law in 10 provinces and is the author of six books, including the Law of Dismissal in Canada.

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