How Does the Economy Shape the Financial Advisory Profession?

We examine whether economic conditions have a long-term impact on the composition of available financial advisors in the profession. We find that financial advisors who start their career in recessions are less likely to commit professional misconduct throughout their career, even compared with thei...

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Bibliographic Details
Published in:Management science 2021-04, Vol.67 (4), p.2466-2482
Main Authors: Law, Kelvin K. F., Zuo, Luo
Format: Article
Language:English
Subjects:
Advisors
Career development planning
Economic conditions
financial advisor
Financial planners
Financial services
Hiring
imprinting
Misconduct
Professional misconduct
recession
selection
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Summary:We examine whether economic conditions have a long-term impact on the composition of available financial advisors in the profession. We find that financial advisors who start their career in recessions are less likely to commit professional misconduct throughout their career, even compared with their colleagues working in the same firm, at the same location, and at the same point in time. We show that this relation between early economic conditions and advisor misconduct remains after controlling for differences in hiring firms, advisor characteristics, and opportunities to commit misconduct. Collectively, our evidence suggests that economic conditions shape the types of financial advisors who are ultimately available in the profession. This paper was accepted by Brian Bushee, accounting.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.2020.3655