Fiduciary advocate launches website to identify ‘trusted’ advisers

Fiduciary advocate launches website to identify ‘trusted’ advisers
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An actively managed ETF, ARKW is an internet fund. Remember those? Top holding is Amazon, up 32.6% this year and weighing in at a price-to-earnings ratio of 187.3, according to Morningstar. Second-biggest holding is athenahealth up 27.39% and sporting a 262.7 P/E ratio. The fund also holds Bitcoin Investment Trust, the top-performing ETF, discussed earlier.

Site to weed through Finra and SEC regulatory disciplinary data

A new website is using regulatory data about financial advisers to go one step further than securities regulators’ databases to help investors decide whom to hire.

The site Investor.com recently exited the testing phase of what it calls its Trust Algorithm, which is now available for public use. The mechanism scrapes background data on financial advisers from the Financial Industry Regulatory Authority Inc.’s BrokerCheck and the Securities and Exchange Commission’s Investment Adviser Public Disclosure sites.

The Investor.com algorithm then sorts and weighs different variables to determine whether a financial adviser or firm earns a so-called trust badge. Advisers are considered trustworthy if they meet certain requirements, such as a limited number of customer disputes, financial disclosures and regulatory events.

Blain Reinkensmeyer, head of product at Investor.com, said the goal of the site is to help consumers press advisers about their probity.

“It’s about empowering Americans to ask the question,” Mr. Reinkensmeyer said. “Let’s help Americans find an adviser they can trust. The data doesn’t lie.”

The site claims to use 23 million data points that are continually updated. Mr. Reinkensmeyer said his site provides better transparency and easier access to regulatory information than the regulators do themselves.

“We built Investor.com with a mobile-first mindset,” said Mr. Reinkensmeyer, who is managing partner of Reink Media Group, a collection of financial websites.

Andrew Stoltmann, a Chicago securities attorney and member of the Public Investors Arbitration Bar Association, gave the site a test drive.

“It’s definitely more user friendly than Finra’s BrokerCheck, so that’s a good development,” Mr. Stoltmann said. “It’s laid out in a manner that people won’t find opaque or confusing.”

Mr. Reinkensmeyer does not hide the fact that the site is oriented toward helping investors find an adviser who adheres to fiduciary duty. The site says that 75% of investment adviser representatives earned the “trusted” designation, while 0% of broker-only registrants are labeled “trusted.”

“I believe in fiduciary advice,” Mr. Reinkensmeyer said.

Knut Rostad, president of the Institute for the Fiduciary Standard, praised the site.

“Its great potential to provide clarity in the marketplace is plain,” Mr. Rostad said. The site “tackles misleading and muddled industry messaging on fiduciary status and what ‘best interest’ means. It goes beyond what BrokerCheck addresses. It gets to the guts of what consumers should be looking for to identify real fiduciaries.”

But financial regulators already provide background on financial advisers that most consumers ignore, said Todd Cipperman, principal at Cipperman Compliance Services.

“The data is out there,” Mr. Cipperman said. “The challenge is getting people to use it effectively. It’s a good start. We’ll see if there’s a market need.”

Mr. Cipperman cautioned that a financial adviser’s disciplinary history is not enough to make a hiring decision. What’s also needed is a qualitative assessment of an adviser’s services and performance history.

“If you could be the Morningstar of investment advice, that would be great,” Mr. Cipperman said. “The market for financial advice is incredibly opaque.”

The site will need to generate revenue to stay afloat. One way it does that is to offer firms and advisers an opportunity to verify a trusted profile, which are then promoted by the site.

That might create a slippery slope, Mr. Stoltmann said.

“This is a commercial enterprise, and you question how independent it is when financial professionals are paying to have their profiles verified,” Mr. Stoltmann said. “That’s kind of murky waters. For this thing to work, investors need to trust Mr. Reinkensmeyer.”

Mr. Reinkensmeyer, a millennial who becomes ebullient when talking about data and investor protection, said investors will “come before profit” and asserted that advisers and firms will not be able to buy a trust badge.

“If you’re not trusted, you’re not going to be in that tool,” he said.

He acknowledges that the site may not attract any more traffic than BrokerCheck or IAPD.

“We don’t know if it’s going to work,” Mr. Reinkensmeyer said. “We have to have the support of the fiduciary-first industry.”

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