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Badges of Misconduct: Consumer Rules to Avoid Abusive Financial Advisers

Author

Listed:
  • Jeffrey Camarda
  • Steven J Lee
  • Pieter de Jong
  • Jerusha Lee

Abstract

The financial advisory industry in the USA lacks professional standardization/regulation. There are few guideposts to assess adviser quality, and risks to consumer welfare abound. Some 91% of investment advisers operate on conflicted sales commission licences, although many market themselves as fiduciaries. Using an adviser misconduct scoring framework we report specific misconduct ratings for each of the 625,980 Financial Industry Regulatory Authority (FINRA) advisers, finding elevated misconduct for Certified Financial Planner (CFP®) professionals and commission/fiduciary licensees. For Chartered Financial Analyst (CFA®) professionals, we found the opposite. We propose a unique scoring system to aid consumers in flagging problematic advisers. We also offer simple regulatory policy recommendations, which could enable stronger consumer protection at minimal cost or bureaucratic burden.

Suggested Citation

  • Jeffrey Camarda & Steven J Lee & Pieter de Jong & Jerusha Lee, 2023. "Badges of Misconduct: Consumer Rules to Avoid Abusive Financial Advisers," Journal of Financial Regulation, Oxford University Press, vol. 9(2), pages 210-224.
    • Handle: RePEc:oup:refreg:v:9:y:2023:i:2:p:210-224.
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    File URL: http://hdl.handle.net/10.1093/jfr/fjac012
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