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By Denver Nicks
March 1, 2016
Adrianna Williams—Getty Images

We all know some financial advisers are crooked but a new study tallying misconduct in the industry reveals that bad apples are a lot more prevalent than you might have thought, making up nearly a fifth of advisers at some firms.

The paper titled “The Market for Financial Adviser Misconduct,” by business professors at the University of Chicago and the University of Minnesota, documents what study authors call “the economy-wide extent of misconduct among financial advisers and financial advisory firms.”

Looking at just six of 23 categories in BrokerCheck, a misconduct disclosure database maintained by the Financial Industry Regulatory Authority, or FINRA, the study finds that an industry-wide average of 7% of financial advisers have misconduct records against them. FINRA is the financial industry’s self-regulating entity and study authors say their estimate is conservative.

At some firms misconduct is far more prevalent—at Oppenheimer & Co., a fifth of the firm’s 2,275 advisers had misconduct records against them at the time the study was conducted. More than 15% of the 12,175 financial advisers at Wells Fargo Advisers FN had records against them as well.

The study found that, while some firms trade on their reputation for fair dealing, others “‘specialize’ in misconduct and cater to unsophisticated consumers,” targeting victims who are unlikely to catch them in the act.

Records are significant because they portend future misconduct. Prior offenders are five times as likely to engage in misconduct again as an average financial adviser, according to the study. And though discipline tends to be delivered swiftly—about half of financial advisers disciplined for misconduct lose their jobs—44% of those are reemployed in the industry within a year.

Thanks to FINRA’s BrokerCheck database, you can easily look into your adviser’s misconduct record riht here.

The news comes just as the White House is finalizing a rule—over the vociferous objections of Wall Street and Capitol Hill Republicans—requiring financial advisers to act in the “best interest” of their clients.

The good news is that if this report has ruined human financial advisers for you forever, you now have another option: robots.

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The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

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