Given the intangible nature of financial advice, advisors and their firms rely heavily on perceived trust and their reputation to earn clients. As a result, both advisors and their firms have a strong incentive to distance themselves from the bad apples of the industry.
Yet a newly released study, The Market for Financial Adviser Misconduct, finds that market forces and the industry’s self-regulatory mechanisms are failing to expunge the bad apples. Consequently, 73% of advisors who disclose a material misconduct event on FINRA BrokerCheck are still employed a year later, despite such brokers being a whopping five times more likely to engage in misconduct again.
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