Jesse Ellis, the Alan T. Dickson Distinguished Professor of Finance at the Poole College of Management, recently appeared on The Academic Minute – an NPR program based out of WAMC/Northeast Public Radio, highlighting professors from top institutions and their research. Ellis discussed his research on how childhood environments affect financial advisors’ ethical codes.

Ellis says that “about one in thirteen financial advisors has a record of misconduct.” Noting that regulations and market incentives aren’t enough to stop this, he dove more into what created personal ethics. Specifically, “We asked whether advisors’ professional conduct is shaped by the ethical climate of their childhood hometowns.”

For the study, “We tracked more than 86,000 financial advisors from their childhood addresses into their adult careers. Using regional data on political corruption, corporate fraud, and other ethical violations, we built a misbehavior index capturing each area’s ethical climate.”

They found that “advisors raised in Staten Island show misconduct rates around 16 percent; those from Omaha just over 2 percent. Even after advisors move across the country, childhood hometown culture predicts misconduct more strongly than their current location’s culture.”

Ellis concludes that “monitoring and reputation help, but ethical behavior in finance also reflects the moral standards we internalize growing up — what Adam Smith called the impartial spectator that guides us when no one is watching.

Read or listen to his entire segment on The Academic Minute’s Substack.