By Allison Bressi, Compliance & Administrative Manager
At Versant Capital Management, we stay apprised of the latest information pertaining to ethical conduct in the financial industry.
Recent studies by the Financial Industry Regulatory Authority (FINRA), consulting groups, and academic institutions re-emphasize the criticality of hiring an adviser with a history free of misconduct, according to a recent article published in The Wall Street Journal.1 These studies examined thousands of brokers and firms over varying time periods, and data analysis provided two key findings.
Financial professionals with a history of misconduct are typically not driven out of the business, but hired again by other firms.
A study at the University of Minnesota and the University of Chicago found that brokers with a history of customer complaints were not driven out of the industry – rather they were hired by other firms. This is especially problematic given that there is no current way for investors to readily figure out which firms have the most employees with complaints or misconduct. This disturbing trend gets worse:
Financial professionals with a history of misconduct are far more likely to engage in misconduct again.
A FINRA study completed last fall found that brokers who have been active since before 2000, and those whose colleagues have a history of misconduct, are nine times more likely to generate complaints from customers. Another study examining 150,000 brokers at nearly 1,000 firms found that if an average broker merges with a firm that has a history of misconduct, that firm will then become one third more likely to incur customer complaints.
So, with an industry that often re-employs bad apples who are more likely to re-offend, how can an investor find a financial professional to trust? Look no further.
Versant’s disciplinary record is spotless.
Versant prides itself on the ethical standards of its business, its employees, and the vendors with whom it does business. We are committed to doing the right thing for our clients, both on and off the record. We are proud to say every one of our employees has a clean disciplinary history, and we encourage you to verify that by clicking on the Our Record section of the Versant website for links to regulatory authorities. We hope you will feel confident knowing you are in good hands with a wealth counselor you can trust.
[1] The Wall Street Journal, “Is Your Broker Good or Bad?” April 22, 2016
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