Oppenheimer has the highest percentage of advisers who have been disciplined for misconduct.

There are more wolves on Wall Street than you might realize.

In a paper published last month, academics Mark Egan, Gregor Matvos and Amit Seru, looked at conduct records for financial advisers.

They point out that while a number of highly-publicized scandals (think “Wolf of Wall Street”) have rocked the industry, the full scale of misconduct has not been “systematically documented.”

Their study, they argue, is the “the first large-scale study that documents the economy-wide extent of misconduct among financial advisers and financial advisory firms.”

The findings are pretty damning. Misconduct is surprisingly common, and there are a number of repeat offenders out there moving from firm to firm.

Screen Shot 2016 03 01 at 11.36.45 AM

The academics crunched the data on 1.2 million current and former advisers in the period from 2005 to 2015, and found that 7.28% have been disciplined for misconduct and/or fraud. That is equivalent to around 87,000 people.

Here are some key stats:

  • The most common cause of a misconduct disclosure is a customer dispute that has been settled.
  • The three most common reasons for customer disputes are unsuitable advice, misrepresentations and unauthorized activity.
  • In some counties in Florida and California, around 20% of advisers have been disciplined.
  • Roughly one third of the 7% disciplined are repeat offenders.
  • Past offenders are five times more likely to engage in misconduct than the average adviser.
  • The median settlement payment paid to customers is $40,000.
  • Over half of financial advisers who engage in misconduct keep their job in to the following year.
  • And 44%, of those who do lose their job after misconduct find a new job with a year.
  • Morgan Stanley and Goldman Sachs have the lowest percentage of advisers who have been disciplined for misconduct, while Oppenheimer has the highest.

Here is an excerpt from the paper:Screen Shot 2016 03 01 at 11.52.00 AMAcademic paper

Bloomberg View’s Matt Levine drew my attention to the study. Read his post on it here:

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