FINANCIAL markets can seem bewildering to those who don’t have the time and energy to understand them: all that jargon, all those sudden switches in mood. So it is natural that people look for help when trying to find the right products. In America, more than half of all households have sought advice, according to a survey conducted in 2010. They have more than 650,000 registered financial advisers to choose from.
But how good is that advice? It can be hard to tell. There may be an “information asymmetry” between the advisers and the clients, simply because finance can be so complex. Furthermore, although a diner can instantly tell if wine is corked or steak is tough, it may be many years before the success or failure of a financial tip becomes apparent.
A new paper* examines the records of American financial advisers between 2005 and 2015, using a database that contains 1.2m individuals. It finds that 7% of the advisers were disciplined for misconduct over the period, resulting in a median payment to customers of $40,000 in compensation. Around one-third of the miscreants are repeat offenders; past transgressors are five times more likely to engage in misconduct than the average adviser.
What happens to the offenders? Just over half, astonishingly, keep their job. Although the remainder are let go, 44% of them are rehired by another firm...Continue reading
Source: Business and finance http://ift.tt/1QuqQIo
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