Certification and fiduciary liability in the U.S. financial advisor industry

详细信息   

• 作者：Gough ; Jeffrey M.
• 学历：Doctor
• 年：2014
• 关键词：Social sciences ; Certification ; Complaints ; Disclosur
• 导师：Benson,Bruce
• 毕业院校：The Florida State University
• Department：Economics
• 专业：Economics
• ISBN：9781321546415
• CBH：3681722
• Country：USA
• 语种：English
• FileSize：633193
• Pages：98

文摘

The U.S. financial advisor industry seems to have all of the necessary ingredients for a classic lemons problem: an information asymmetry between advisor and client,frequent conflicts of interest between advisor compensation and client goals,and uncertain quality stemming from the many credence good features of financial products and advice. In this study,the first of two empirical investigations sets out to test whether voluntary advisor certification helps to mitigate this potential lemons problem. Using a unique dataset constructed from public registration records,certification appears successful in this mitigation role. Specifically,higher quality is evident among certified advisors who,after controlling for other observable characteristics,are estimated to have 30 percent lower rates of disclosure events per year of experience than their non-certified counterparts. It is argued that this quality segmentation is the result of an underlying signaling mechanism. Current federal law imposes fiduciary liability upon financial advisors registered as investment adviser representatives (IARs.) However,despite offering similar services,this same liability standard is not applied to advisors who register as brokers. Many groups,including the U.S. Congress,express concern about how this fiduciary discrepancy creates negative consequences for broker clients. While well-defined consequences are often left unspecified,it is typically implied that brokers,owing fewer legal obligations to their clients,engage in more misconduct than IARs. The second empirical investigation of this study sets out to test whether this presumed misconduct is evident in higher rates of customer complaints. Despite popular concern,several methods of analysis are unable to find any statistically significant difference between the complaint rates of brokers and IARs. Instead,it appears that advisors with dual registration--a group that presumably accepts some fiduciary obligations--are the most likely to generate significantly higher complaint rates. This study proceeds to defend the use of customer complaints as an indirect measure of misconduct and describes several factors which might mitigate the effects of a fiduciary discrepancy.