A study of U.S. advisor records, published in the Journal of Political Economy in 2019, found that about 7% of financial advisors had a misconduct record. About a third of those advisors had offended more than once, and an advisor with a prior offense was roughly five times as likely as the average advisor to commit new misconduct.
About half of the advisors lost their jobs after misconduct. Other firms often rehired them, and the firms that did tended to have higher misconduct rates themselves. The authors call the pattern “matching on misconduct.” At some of the largest advisory firms, more than 15% of advisors had a record.
The same numbers cut the other way. Roughly 93% of advisors in the study had no misconduct record, and the lookup that separates the two groups is public and free.
Search the person and the firm
The Securities and Exchange Commission’s Investor.gov lookup tool sends searches to the Investment Adviser Public Disclosure site. Results show whether the person and the firm are registered with the SEC, with one or more states, or with the Financial Industry Regulatory Authority (FINRA), along with any disciplinary history for either one.
Searching both matters. The study’s firm-level numbers show that the firm behind a name can tell you something the individual entry does not.
For brokers, the search may route to FINRA’s BrokerCheck, which lists employment history, licenses, qualification exams passed and any disciplinary disclosures. Many professionals appear in both places, and it is worth reading both entries.
What to read first
Start with registration status, which shows whether the person and firm are registered and where. Then read the disciplinary section and then the employment history. A string of short stints at different firms is not misconduct, but given how the study found advisors with records tend to move between firms, it is a fair question to raise.
A clean record means no recorded discipline. It does not say whether the advice will fit a particular household. An advisory firm’s entry includes its Form ADV brochure, which lays out its fees and how it is paid. The exact cost for a particular account still have to come from the advisor, ideally in writing.
Where to find names to check
Many people start with a friend’s recommendation. Others have no name at all, and advisors are only one of the places Americans take their money questions, alongside chatbots, family and web searches, according to a survey of people seeking money help.
If you have at least $100,000 in investable assets, Advisor.com can match you with a financial advisor.
Whichever route produces a name, the Investor.gov search is free, so running it on two or three candidates costs nothing but a few minutes each. Run it before the first meeting, print the results page and bring it along.
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