In­vestor be­ware

Albuquerque Journal - - BUSINESS -

A re­cent aca­demic study finds that 7 per­cent of fi­nan­cial ad­vis­ers have mis­con­duct records. Most man­age to keep work­ing in the in­dus­try. The re­port by Mark Egan of the Univer­sity of Min­nesota and Amit Seru and Gre­gor Matvos of the Univer­sity of Chicago finds ev­i­dence that rogue ad­vis­ers pay a price. More than half lose their jobs, and con­sumers col­lect a me­dian $40,000 when firms set­tle mis­con­duct cases.

But the study finds that “the la­bor mar­ket par­tially un­does’’ the dis­ci­pline: 44 per­cent of those who lose their jobs find work in fi­nan­cial ser­vices within a year — though they ac­cept a 10 per­cent drop in pay and tend to move to “less rep­utable’’ firms. In fact, the re­searchers find, some firms seem to “spe­cial­ize’’ in tar­get­ing poorly ed­u­cated, elderly peo­ple.

The Se­cu­ri­ties In­dus­try and Fi­nan­cial Mar­kets As­so­ci­a­tion, which rep­re­sents banks and in­vest­ment firms, calls the find­ings “overly broad and in­flated.’’ One com­plaint: The study counts ev­ery set­tle­ment as an ex­am­ple of mis­con­duct.

SIFMA ar­gues that firms some­times set­tle to save time and money or for other rea­sons “hav­ing noth­ing to do with al­leged ‘mis­con­duct.’”

Where the rogues are Fi­nan­cial ad­vis­ers with records of mis­con­duct — and the firms that em­ploy them — are es­pe­cially at­tracted to places with “low ed­u­ca­tion, elderly pop­u­la­tions, and high in­comes.’’

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