Adviser reviews coming soon to a website near you

What the relaxed restrictions will mean for your business

Apr 9, 2014 @ 1:51 pm

By Liz Skinner

Financial advisers should keep an eye open for a new form of client feedback that's on its way — public reviews.

The guidelines issued last week by the Securities and Exchange Commission for how financial advisers can use testimonials in social media is expected to spur the creation of more online venues for the public to review and rate their financial advisers.

The SEC said advisers can now link to sites such as Yelp!, as long as the reviews are independent from the adviser and aren't organized to display only chosen testimonials, such as exclusively positive feedback. Regulators also said advisers may advertise on these third-party sites.

“I don't think that online searches for financial advisers is going to turn the world upside down in 2014, but long-term, the writing is on the wall,” said Grant Easterbrook, a senior research associate at consulting firm Corporate Insight.

(Take the quiz: Are your client review tactics compliant?)

Just as many Americans have learned to use online recommendations to pick restaurants, hotels and even doctors, the process of choosing a financial adviser is likely to incorporate a check of his or her online reviews.

(See Michael Kitces' take on the new guidelines.)

In fact, a Corporate Insight survey of American investors in December 2013 found that 67% of Generation Y/Millennials said they would definitely or probably use an online search tool to find an adviser. About 28% of baby boomers said they would use one, Mr. Easterbrook said. These online searches often include third-party sites that give a rating and testimonials to companies offering a given service.

Several general online research tools like Yelp!, AngiesList and FindtheBest already incorporate adviser reviews, but the number of reviews that have been posted are small. Personal-finance focused WalletHub also allows for adviser reviews.

Pinnacle Advisory Group's Michael Kitces on how review sites could impact the advisory business.

Financial information website Brightscope Inc. plans to add reviews in light of the new guidance, said Sonia Ahuja, the firm's executive vice president of strategy and business development. U.S. News and World Report also might consider adding reviews in the future for its new Advisor Finder directory, said Kirk Shinkle, senior editor for money and business.

The SEC's action is too late for the entrepreneurs who started TippyBob as a site for financial adviser ratings and reviews in 2012. They shut down the site last year because they couldn't “get enough traction,” said co-owner Annie Campbell.

“There was just too much regulation regarding testimonials at that time,” she said.

WalletHub chief executive Odysseas Papadimitriou said he believes more advisers will advertise on WalletHub now that the SEC has given them the green light. That would help his firm generate revenue.

Wallethub created profiles for about 250,000 financial advisers based on public information before it launched in August 2013. Advisers can claim their profile and customize it for free. Mr. Papadimitriou said the firm doesn't know how many people have written adviser reviews.

The SEC's move last week “is validation to the importance of reviews in this space,” he said.

“The thing I get nervous about with third-party review sites is, there's always a bad apple who figures out how to game the site,” said Amy McIlwain, president of consulting firm Financial Social Media. “We don't want that to happen in the financial space.”

With some review sites, people can essentially buy a collection of positive reviews, she said, and that's not what the SEC has in mind. Adviser review sites also will have to have a strict policy about authenticating the people who are reviewing or rating advisers to make sure they aren't ex-employees or competitors posing as clients.

Advisers will have to be aware of where their names are popping up on third-party sites and interact with those profiles “to paint a clear picture of what they do from a business perspective,” Ms. McIlwain said.

“You don't want people going to a blank profile,” she said. “Advisers need to continually monitor their brand and online reputation.”

Advisers also have to accept that there likely will be negative reviews, as consumers often are more inspired to write about bad service than to compliment a positive experience, said Joanna Belbey, a social media and compliance specialist with Actiance Inc.

"Advisers will have to think about how they'll deal with bad reviews," she said.

Alan Moore, an adviser who mostly handles clients from Generations X and Y, said his clientele has been asking where they could offer online reviews of his service.

He's eager to see review sites become more robust.

“We're the only profession where you can't comparison shop online,” said Mr. Moore, founder of Serenity Financial Consulting. "Those of us in the good-apple bunch are going to benefit from this."


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