Unsung guardians? Communal fraud susceptibility and complaints following mass financial adviser attrition

Abstract

This paper illustrates lesser-known positive impacts of financial advisers on communal fraud susceptibility. The analysis focuses on the unprecedented scale of adviser departures triggered by heightened educational and ethics requirements recently introduced in the Australian financial planning industry. We exploit this quasi-experimental setting of mass exits from the wealth management industry to show the removal of professional financial advice increases fraud in affected localities. Areas having proportionately more advisers with membership in professional associations register fewer cases of fraud. Other adviser heterogeneities, including higher education qualifications, do not discernibly reduce fraud pervasiveness or consumer complaints.