Would you like to check the history of your financial adviser? you should

The financial industry is not the most trusted industry among Americans, but investors have a career as an advisor. Check.

More than 7% of financial advisers have a history of fraud, ranging from investing clients in inappropriate investments to complete fraud. It shows "relatively common" problematic behavior. ,, a new paper from researchers at the University of Chicago Booth Business School and the University of Minnesota Carlson School of Business.

It's annoying enough, but researchers have found that those "bad apples" are often not excluded from the financial industry. They often find new jobs at competitors, even if financial misconduct leads to the dismissal of the company with the advisor. And researchers found that after advisors were involved in cheating, they could continue to behave in the shade.

"What surprised me was that this is a very competitive industry, there are many companies, and this information is very easy. It's accessible, "said Gregor Matvos. One of the authors of the study and an associate professor of finance at the University of Chicago. "Despite that fact, wounded advisors are employed by some of the industry's largest companies. That was one of the biggest surprises."

Historical advisors However, much of the fraud is suffering from their careers. I often see. When they find a job after an incident, it is often a less authoritative company and lower wages. As a result, such advisors are hired by companies that already have staff with similar issues, and researchers suggest a "match" between the company and the advisor on the issue of fraud. I point out that there is.

So which companies fall into that category? Researchers gathering information from FINRA's Broker Check database of all financial advisers who worked in the United States from 2005 to 2015 named the companies with the highest percentage of past fraudulent advisers. (See table below). It turns out that

Oppenheimer & Co. is at the top of the list and one of the five advisors has at least one fraud case in the file. In a statement, Oppenheimer said, "To proactively address risk and compliance issues in the private client sector, including adding compliance and auditing experts, upgrading systems, appointing new senior management and new global compliance officers. We have made a large investment. "

"Oppenheimer recognizes the need to address these legacy issues head-on and takes precautions to ensure that advisors and other employees meet the highest ethical standards. I'm confident that it is, "the company said.

Investors need to check FINRA'sBrokerCheck siteto investigate advisors, rather than relying on companies to hire only intact advisors, Matvos said. Says. He said some investors may not be aware of the resource. And there may be advisors using it.

Advisors with fraud records are common in geographic areas where certain types of people are found. Wealthy, elderly, and less knowledgeable about financial issues. In some counties in Florida and California, the percentage of "bad apple" advisors is high, and in Monterey, California and Palm Beach, Florida, the percentage of advisors who have cheated in the past is 18.4% and 18.1%, respectively. ..

“On average, there will be more illegal activity in areas with older people,” says Matvos. "Let's say you're a surgeon. You've made a lot of money, but that doesn't mean you've spent a lot of time building your portfolio."

Reconciliation of Illegal Acts Given the median of $ 40,000, the researchers pointed out that these advisors suggest serious damage to households. Studies show that investors working with advisors who have cheated in the past are very likely to endanger nest eggs.

"People who have previously committed illegal activities are more likely to engage in illegal activities," Matobos said. "Once you do it, you're more likely to do it again. This applies to all service industries. There are good and bad plumbers. The question is how the industry deals with these bad eggs. So will they continue to serve or will they disappear? Many of them seem to be sticking. "