Badges of Misconduct : Consumer Rules to Avoid Abusive Financial Advisors

The financial advisory industry lacks professional standardization/regulation. There are few guideposts to assess advisor quality, and risks to consumer welfare abound. Some 91% of investment advisors operate on conflicted sales commission licenses, though many market themselves as fiduciaries. Using the advisor misconduct scoring framework of Camarda (2017), we report specific misconduct ratings for each of the 625,980 FINRA advisors, finding elevated misconduct for CFP®s and commission/fiduciary licensees. For CFA®s, we found the opposite. We propose a unique scoring system to aid consumers in flagging problematic advisors. We also offer simple regulatory policy recommendations, which could enable stronger consumer protection at minimal cost or bureaucratic burden