Year of Publication

2016

Degree Name

Doctor of Philosophy (PhD)

Document Type

Doctoral Dissertation

College

Business and Economics

Department

Finance and Quantitative Methods

First Advisor

Dr. William Gerken

Second Advisor

Dr. Paul Childs

Abstract

Brokers and investment advisors are a large and important part of the financial industry. Using a novel data set that includes the majority of the financial advisory industry, in this dissertation I document the size of the financial advisory industry and the prevalence of customer complaints in the industry, which I use as a proxy for misconduct. I then test for two potential drivers of advisors’ misconduct: professional standards in the form of fiduciary responsibilities and influence from social networks. I find that variation in fiduciary duties—specifically fiduciary versus suitability standards— does not appear to affect advisors’ propensity for misconduct. My results indicate that a more likely explanation for differences between brokers and investment advisors stems from their respective product lines and business models. I then show that advisors often influence each other’s propensity to engage in misconduct, and that endogenous selection mechanisms, correlated environments, and location cannot fully explain variation in misconduct across groups of co-workers.

Digital Object Identifier (DOI)

https://doi.org/10.13023/ETD.2016.417