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  • Writer's pictureSteven Lee

Second Publication!!

Recently, I found out that our paper, "Do CFP(r) professionals engage in less misconduct? Exploring the importance of job classification when comparing misconduct rates among financial service professionals," which was co-authored with Derek Tharp, Jeff Camarda, and Pieter de Jong (Derek Tharp as leading author), was accepted for publication by Applied Economics Letters. This journal is based in the United Kingdom and prints short, concise papers that focus on prudent topics within economics and similar disciplines.

It was a pleasure working with this research group. We investigated the role that job classification plays in misconduct analyses regarding financial advisors, namely those that hold the CFP(r) designation. This work deals with what are called unobserved differences or even unobserved bias within data sets. We used the same data that Jeff Camarda utilized in his dissertation of registered reps licensed to do business in Florida. Unlike prior papers, however, we tweaked the logistic regression analysis to include both financial advisors whose roles we could verify as "client-facing" (that is, working with clients directly) as well as those whose roles were ambiguous.

Our findings suggest that when ambiguous-role advisors are included in the mix, CFPs are more likely to engage in misconduct. However, when the ambiguous-role advisors are removed from the model, the direction of significance changes: CFPs became less likely to have engaged in misconduct. These findings suggest that unobserved differences in job classification and job roles are important and can bias results even within a large data set such as that of FL-registered reps.

There are many advisors who hold the CFP marks but are not client-facing. These include firm principals (those acting in supervisory capacity) or compliance personnel as well as licensed sales assistants and even academics who, while licensed, do not maintain a book of business at all. In addition, trade desk personnel, analysts, and many others within a financial planning firm may also be licensed, hold the CFP(r), yet do not directly engage with clients and therefore are not "brokers of record." Then, there are those who spend some--but not all--of their time in client-facing roles. This is a major limitation to current data available on financial advisors: How to define "client-facing" and job classifications/roles. Within the current regulatory scheme, job classifications are not usually available to the public. Jeff Camarda's data was purchased from Discovery Data, who had enriched the data set to include job classification, which requires a tremendous amount of work including executing complex algorithms to search each rep's social media profile and public digital footprint for key words and other indicators that relay what types of job functions the rep regularly carries out in his or her line of work.

While there remains much work still to be done, this is an important step in pulling back the veil to analyze the interaction between being a broker, holding the CFP(r), and one's job classification. In future papers, I hope to glean further insight into the relationship between designations and job classifications as well as both firm and individual-level characteristics when it comes to advisor misconduct.

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