▣ DATA BRIEF · FINANCIAL MISCONDUCT
☀ Key Stats
◆ Republican-affiliated financial advisers were 9.6% more likely to have a misconduct disclosure relative to the overall mean rate in the study’s preferred within-branch comparison.
◆ The study covers 662,823 U.S. financial advisers, 5,599 firms and 150,207 branches between 2012 and 2022.
◆ The analysis contains nearly 5.7 million adviser-year observations.
◆ Before statistical adjustments, annual misconduct rates were 0.25% for Republican-affiliated advisers, 0.17% for independents and 0.14% for Democrat-affiliated advisers.
◆ The partisan gap was small and statistically insignificant in the two less-Republican branch groups, but rose to about 18% of the overall mean misconduct rate in the most Republican third of branches.
◆ In branches with the greatest history of prior misconduct, the estimated partisan gap reached 0.050 percentage point, compared with 0.013 point in branches with no prior misconduct.
◆ Among advisers with a misconduct disclosure, stronger political alignment with coworkers was associated with an additional 5.2-percentage-point reduction in turnover.
◆ The matched sample contained 24,354 customer disputes, of which 11,855 met the authors’ definition of misconduct.
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Republican-affiliated financial advisers were 9.6% more likely to have a misconduct disclosure relative to the overall mean rate when compared with advisers working in the same branch at the same time, according to a new research paper examining more than 660,000 U.S. financial professionals.
The finding persisted after the researchers accounted for experience, professional qualifications, prior misconduct and demographic differences, but the partisan gap was highly dependent on the political makeup of the workplace.
In politically mixed branches, the difference was small and statistically insignificant.
In the most Republican third of branches, however, the estimated gap more than doubled and was equivalent to about 18% of the sample’s average misconduct rate.
◎ HEADLINE FINDING
9.6% higher
Estimated Republican-to-Democrat misconduct-disclosure gap relative to the unconditional mean rate after comparing advisers in the same firm, city and year.
The 9.6% figure is a relative gap, not a 9.6-point difference
The headline figure needs an important qualification because misconduct disclosures were uncommon in any individual year.
The preferred regression estimated an absolute partisan gap of about 0.0191 percentage point, compared with an unconditional annual misconduct rate of roughly 0.20%.
Expressing that absolute difference relative to the average produces the paper’s 9.6% figure.
The raw, unadjusted annual rates were 0.25% for Republican-affiliated advisers, 0.17% for independents and 0.14% for Democrat-affiliated advisers.
↔ RAW ANNUAL MISCONDUCT RATES
Republican-affiliated · 0.25%
Independent · 0.17%
Democrat-affiliated · 0.14%
Those descriptive rates do not control for differences between advisers, which is why the paper’s headline result comes from the more restrictive within-branch comparison.
↳ WORKPLACE ENVIRONMENT · THE GAP WAS NOT UNIFORM
The partisan gap was close to zero in more politically mixed branches
The study’s most notable secondary result is that the partisan difference changed sharply with the political composition of advisers’ workplaces.
When branches were divided into thirds according to their Republican share, the estimated partisan gaps were just 0.003 and 0.007 percentage point in the lower two groups and were not statistically significant.
In the most Republican third, the gap increased to 0.037 percentage point, more than double the 0.015-point full-sample estimate used in that branch-composition analysis.
The authors calculate that the larger estimate was equivalent to roughly 18% of the unconditional mean misconduct rate.
◎ MOST REPUBLICAN THIRD OF BRANCHES
~18% of mean misconduct
Estimated partisan gap in the branches with the highest Republican share.
The pattern was asymmetric: greater Republican concentration was associated with a widening gap for Republican-affiliated advisers, while misconduct among Democrat-affiliated advisers was essentially unchanged.
The authors therefore argue that political homogeneity itself is not enough to explain the result.
Branches with prior misconduct showed a larger partisan gap
The workplace pattern also appeared when the researchers grouped branches according to coworkers’ history of misconduct.
The partisan gap reached 0.050 percentage point in the third of branches with the most prior misconduct, compared with 0.013 point in branches with no such history.
The relationship was not perfectly ordered across every group, so the authors describe this evidence as weaker than the political-composition result.
Together, the findings suggest that the observed partisan difference is concentrated in particular workplace environments rather than applying uniformly to every Republican-affiliated adviser.
↳ AFTER MISCONDUCT · COWORKER ALIGNMENT MATTERED FOR TURNOVER
Political alignment with coworkers was linked to 5.2-point lower turnover
The researchers next examined what happened to advisers after a misconduct disclosure.
Among advisers with misconduct, moving from complete political misalignment with coworkers to complete alignment was associated with an additional 5.2-percentage-point reduction in the probability of leaving the firm.
The same additional protection was not detected for political alignment with branch managers.
The authors interpret that difference as evidence that coworker relationships, rather than management alone, may be important to the workplace pattern.
Important distinction: The turnover result concerns political similarity between an adviser and coworkers. The researchers say the protective effect did not significantly differ by party, so they interpret it as a broader in-group effect rather than a uniquely Republican effect.
Advisers also tended to move toward more politically aligned firms
Political similarity appeared again when advisers changed employers.
Among movers, the political-alignment score between Republican-affiliated advisers and managers at their next firm was 0.23 point higher than for Democrat-affiliated movers on the study’s zero-to-one index.
The paper says that difference was roughly equal to one standard deviation of the alignment measure.
Having misconduct in the year of the move widened that partisan sorting gap by another 0.085 index point, while a prior misconduct history widened it by 0.049 point.
The authors interpret this as evidence that advisers with misconduct can re-match into workplaces whose management is more politically similar to them.
The study does not find a larger partisan gap in fraud allegations
The researchers also analyzed the text of customer complaints to determine whether the partisan gap reflected different kinds of alleged behavior.
Conditional on having a misconduct disclosure, Republican-affiliated advisers were not more likely to face allegations involving fraud or misrepresentation, according to the paper.
Instead, the differences were concentrated in allegations involving judgment calls such as churning, suitability, fees and risk.
That distinction is important because the study does not support a simple interpretation that one partisan group was systematically more likely to engage in intentional deception.
The analysis covers 662,823 advisers over 11 years
The researchers combined FINRA BrokerCheck records with self-declared party affiliations from voter-registration data.
After the paper’s sample restrictions, the dataset included 662,823 unique advisers working for 5,599 firms across 150,207 branches from 2012 through 2022.
That produced approximately 5.69 million adviser-year observations.
Of those observations, about 2.73 million were classified as Republican, 1.60 million as independent and 1.37 million as Democrat.
The matched sample included 24,354 customer disputes, of which 11,855 were settled or resolved with an award, judgment or final disposition and therefore met the paper’s definition of misconduct.
Experience and customer sorting did not explain the main gap
Republican-affiliated advisers had more industry experience on average — 16.3 years compared with 12.7 years among Democrat-affiliated advisers — but the researchers controlled for experience in their main models.
The result also survived comparisons among advisers with similar professional licenses and qualifications.
The researchers tested whether Republican-affiliated advisers might disproportionately serve wealthier customers, creating different opportunities for complaints or misconduct.
They did not find evidence that differences in the local prevalence of high-net-worth customers explained the partisan result.
The paper also tested whether advisers behaved differently when their political party controlled the state governorship and found no evidence that alignment with the party in local power explained the gap.
✦ Why it matters ✦
Financial advisers make decisions involving household savings, retirement accounts and investments, so even relatively uncommon misconduct can carry substantial costs for customers.
Earlier peer-reviewed research found that about 7% of U.S. financial advisers had a misconduct record and that roughly one-third of those advisers were repeat offenders.
The new paper adds a different question: whether individual political affiliation and workplace composition help predict where misconduct disclosures occur and what happens to advisers afterward.
Its strongest secondary finding may therefore be the near disappearance of the partisan gap in more politically mixed branches.
That makes the result less about assigning a uniform behavioral characteristic to millions of people in one political party and more about how personal affiliation may interact with workplace culture.
The findings also complement recent StatsJournalist coverage of differences in financial advice, although the two studies examine very different sources of risk to consumers.
ⓘ How to read the findings
The paper is a working paper by James O’Donovan of City University of Hong Kong and Anthony B. Rice of Villanova University. A peer-reviewed journal publication of the paper has not been verified, so the results should be treated as preliminary.
The headline 9.6% is a relative comparison with the overall annual misconduct rate. The estimated absolute Republican-to-Democrat difference in the preferred specification is only about 0.0191 percentage point.
The authors code political affiliation as 0 for Democrat, 0.5 for independent and 1 for Republican. The main coefficient therefore represents the modeled difference across that partisan scale rather than a randomized experiment in political identity.
Political affiliation is used as a proxy for individual values. The study cannot identify exactly which beliefs or values account for the statistical relationship, and it does not show that Republican affiliation itself causes misconduct.
The authors define misconduct using customer complaints that were settled or resolved with an award, judgment or final disposition. A settlement is not necessarily equivalent to a judicial or regulatory finding that an adviser intentionally committed wrongdoing.
FINRA also cautions that disclosure records can contain customer disputes and allegations that have not been resolved or proven. The paper narrows its misconduct measure substantially, but the underlying administrative data should still be interpreted according to those definitions.
The researchers use detailed firm, location and year comparisons and control for experience, qualifications and prior misconduct, but the analysis remains observational. Unmeasured differences between advisers could still contribute to the estimated partisan gap.
The workplace-composition results are particularly important for interpretation. The partisan gap is statistically insignificant in the two less-Republican branch groups and is concentrated in the most Republican branches, meaning the paper does not find a uniform 9.6% difference across every workplace.
The complaint-text analysis also does not find Republican-affiliated advisers more likely to face allegations of fraud or misrepresentation once a misconduct disclosure occurs. The partisan difference instead appears in more judgment-dependent allegations such as suitability, churning, fees and risk.
