Study Accuses Nearly 20% of Oppenheimer Advisers, 15% of Wells Fargo and UBS Advisers, Others of Misconduct
InvestmentNews reports that according to a new working paper by business school professors at the University of Minnesota and the University of Chicago, 7% of financial advisers have been subject to discipline for misconduct. The study noted that at certain large firms, the trend of misconduct exceeds that average. For example, found the paper, at Oppenheimer & Co., almost 20% of its advisors' records indicate misconduct.
Other advisor firms noted for their high misconduct rates included First Allied Securities at 17.7%, Wells Fargo Advisors (WFC) at 15.3%, UBS Financial Services (UBS) at 15.14%, Cetera Advisors at 14.39%, Securities America at 14.3%, National Planning Corp. at 14%, Raymond James Financial Inc. (RJF) at 13.74%, Stifel Nicolaus & Co. at 13.27%, (SF) and Janney Montgomery Scott at 13.27%. Firms with the lowest misconduct rates among its advisers included Morgan Stanley & Co. (MS), Goldman Sachs & Co. (GS), BlackRock Investment (BLK), UBS Securities, Jefferies, Prudential Investment Management, and Wells Fargo Securities, among others.
University of Chicago finance professor Amit Seru, who co-authored the working paper, titled “The Market for Financial Adviser Misconduct” called this misconduct problem “pervasive.” He also said that he believes the study did a conservative job of measuring misconduct, which ranges from behavior such as placing clients in unsuitable investments to the more extreme type, such as using client accounts to trade without their permission. Insurance products were reportedly factor in many misconduct cases.
The study noted that firms often do take action when misconduct by its advisers is discovered. About half of those caught are fired, although 44% of these individuals will typically end up going to another firm. Often these places will have higher misconduct rates, making it possible for the advisers to continue engaging in wrongful behavior. The study said that prior offenders are five times more likely to taking part in new actions of misconduct than the average adviser.