‘Bad advisors’ find home at ‘bad firms’

‘Bad advisors’ find home at ‘bad firms’

‘Bad advisors’ find home at ‘bad firms’ Last week it was revealed how almost half of advisors fired over misconduct are back advising clients within a 12month period (see Advisor: Time for stiffer penalties for misconduct). The obvious question to ask then becomes: “who is hiring these people?”

Well, the answer, it seems, is that some companies might even be targeting those with a poor reputation.

It is perhaps no surprise that there is the odd ‘bad apple’ in the industry, just as there is in almost every aspect of life: indeed the financial advice industry seems to be performing comparatively well if statistics from the University of Chicago are to be believed. In the USA, around 20 per cent of the population has some sort of criminal activity on their record: however, only around seven per cent of advisors have a record containing misconduct.

However, perhaps more worrying is that according to Mark Egan, one of the professors behind the investigation into advisor misconduct, there is evidence that some companies actually specialize in hiring advisors with misconduct in their files.

“These advisors are hired by firms that already employ other advisors with blemishes on their records,” he said. “On average, the firms are smaller, less reputable and pay less.”

According to the report, these advisors are typically earning less than $15,000 a year and these companies are actively targeting wealthy retirees and those who are not financially educated. Indeed they are a lot less likely to fire their advisors even if they commit misconduct again.

Perhaps more of a relief is that Finra has now stepped up its goal to target these advisors. During last year alone, it barred 500 advisors, as well as 25 firms, from the industry completely.
1 Comments
  • Kevin Cahill 2016-03-08 12:28:03 PM
    And then there are good advisors who cannot find a home all because of an accusation that never went anywhere...
    Post a reply