How Does the Economy Shape the Financial Advisory Profession?
52 Pages Posted: 6 Nov 2019
Date Written: October 1, 2019
We examine whether economic conditions have a long-term impact on the composition of available financial advisors in the profession. We find that financial advisors who start their career in recessions are less likely to commit professional misconduct throughout their career, even compared with their colleagues working in the same firm, at the same location, and at the same point in time. We show that this relation between early economic conditions and advisor misconduct remains after controlling for differences in hiring firms, advisor job functions and quality, and opportunities to commit misconduct. Collectively, our evidence suggests a behavioral difference between recession and non-recession advisors and demonstrates that economic conditions partly shape the types of financial advisors who are ultimately available in the profession.
Keywords: financial advisor, recession, FINRA disclosure, misconduct, selection, imprinting
JEL Classification: D14, D18, G20, G24, G28, K22
Suggested Citation: Suggested Citation