Finance Seminar Simon Gervais

The paper builds a rich model explaining why financial advisor misconduct persists, even though clean records lead to higher wages. Clients reward trustworthy advisors — but strategic investment funds can counteract these career incentives by offering commissions that encourage mis-selling when regulation is weak.

The model traces how commissions, trust, wages, and detected misconduct evolve, including why misconduct spikes in downturns and why experienced advisors may be more prone to unethical behavior.

Takeaway: Misconduct in financial advising reflects market equilibrium forces, not just individual ethics — shaped by incentives, regulation, and strategic behavior.