‘Economy-Wide Misconduct’ among Financial Advisers

A Culture of Acceptance
The University of Chicago and the University of Minnesota got together to create a research paper that has a pretty worrying phrase included in the conclusion: ‘economy-wide misconduct.’
Those words could mean a lot of things, but in the context of this particular research paper they referred to the widespread misconduct in the financial services industry. The study found that an astonishing 7% of all financial advisers had been disciplined in the past on account of misconduct. Their offenses included everything from giving the wrong advice to a vulnerable client to outright trading fraud.
Alarming Numbers
The study analyzed publicly available data published on the Financial Industry Regulatory Authority (FINRA) website and created a database that tracked over 1.2 million advisers between 2005 and 2015. This number represented over 10% of all advisers in the country during the period.
Almost all industries rely on trust between providers and customers, but this is especially true for firms in the financial industry. Trust is the cornerstone on which every single financial transaction and professional service is based. So, to have such a high proportion of advisers under disciplinary action is very worrying indeed.

This post was published at Wolf Street by Andrew May ‘ March 30, 2016.