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Brokers, Advisors, and the Fiduciary Standard

31 Pages Posted: 4 Oct 2015  

Nathaniel P. Graham

Texas A&M International

Date Written: October 2, 2015

Abstract

Financial advisors who have a fiduciary duty receive more than 2/3 of all formal customer complaints despite being slightly fewer in number than brokers. I show that the products and services their employers offer explains this difference; advisors at advisory firms and mutual fund dealers receive more complaints than brokers and advisors at insurance and private placement firms receive fewer. The higher incidence of complaints to advisors is not explained by selection at the beginning of a career, location, or proxies for firm oversight, and is similar in states that impose fiduciary duties uniformly on both groups. Because complaints appear to be related to product and service lines rather than the fiduciary or suitability standards, I find little evidence that imposing a fiduciary standard on brokers will address financial fraud.

Keywords: financial advisors, financial advisers, brokers, fiduciary, suitability, broker-dealers, misconduct, fraud

JEL Classification: D18, G20, G28

Suggested Citation

Graham, Nathaniel P., Brokers, Advisors, and the Fiduciary Standard (October 2, 2015). Available at SSRN: https://ssrn.com/abstract=2668888 or http://dx.doi.org/10.2139/ssrn.2668888

Nathaniel Graham (Contact Author)

Texas A&M International ( email )

Laredo, TX 78041-1900
United States

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