<b>OpINion Online:</b> A guide for RIA crooks

If you've got more than a little larceny in your heart, becoming an RIA may be a better route to unjust rewards than being a registered rep.

Whenever I write about wirehouse management or a fiduciary standard, I invariably get comments from brokers saying that I’m biased in favor of registered investment advisers.
Let me set the record straight and use this space to be an equal-opportunity offender: While I think investors seeking advice generally get a better shake from an adviser who puts the client’s interests first, RIAs are not necessarily saints. In fact, they can be just as crooked as crooked brokers.
Of course, the vast majority of RIAs and reps want to do right by their clients, and most do just that. Yet, if you’ve got more than a little larceny in your heart and you’re willing to risk wearing an orange jumpsuit for the rest of your life, becoming an RIA may be a better route to unjust rewards than being a registered rep.
Because they tend to work independently and are less tightly bound to nitpicky organizations, RIAs of the malevolent bent probably can get away with more bad behavior than criminally inclined denizens of the broker-dealer world (where churning of high-commission crapola is carefully monitored — and sometimes even caught — by compliance personnel and Finra).
So based on an exhaustive examination of recent scams and frauds, let me provide a short how-to guide to criminal success as an adviser:
First, get a great haircut or hair transplant, if necessary. Being well-coiffed and luxuriantly follicled seems to be a requirement of big-time financial con artists.
Next, adopt an attitude of unrelenting, unceasing and unwavering equanimity. If the Dow falls 478 points in six minutes or the Fed raises interest rates by 200 basis points, stay poised and calm. The best financial con artists emit such a powerful aura of “knowingness” and conviction that no one ever suspects they’re pulling a fast one.
Third, deal only with very wealthy clients. They are just as clueless as your average affluent client and just as easy to manipulate. So take a leaf from Willie Sutton and go where the money is.
Here’s the hardest part to master: Treat all prospects with a hint of condescension. Greet them and deal with them in such a way that the message is always clear: “It’s a pleasure for you to know me.” Doing business with you is also a privilege, and one that you bestow only grudgingly on the fortunate.
As far as your investment philosophy is concerned, remember that no matter what they say, the ultrawealthy have zero risk tolerance and demand above-average returns. Such a Lake Wobegon approach to investing practically cries out for fictional performance, so here’s where your creativity comes in.
Take a conservative investment — say, investing in Treasuries — and tart it up with your own secret sauce — say, a computerized volume-based formula created by a team of MIT technologists that accurately signals interest rate movements. Of course, such a system is total cotton candy, but it sounds eminently plausible, not to mention too boring and complicated to verify.
You can allude to your system in your brief conversation with prospects, but don’t go much beyond your printed 10-year performance record (wink, wink) if anyone asks.
Finally, get your paws on a copy of “Ponzi Schemes for Dummies” and follow the step-by-step rules for keeping two sets of books.
One last thought. Always incorporate your name in your firm’s name, as in “Joseph Jones Wealth Management.” Wealthy investors want to know they’re dealing with the reputable person behind the name. To paraphrase movie mogul Samuel Goldwyn, “The most important thing is integrity; once you’ve learned to fake that, you’ve got it made.”