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 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.