Brightscope Inc.'s plan to disclose advisers' fee schedules could provide the public with a powerful tool to compare pricing, but it could also create more issues about questionable data for the online ranking service, which tracks advisers and retirement plans.
The firm plans to begin releasing adviser fee information sometime this year — by fall at the latest, said Mike Alfred, co-founder and chief executive of Brightscope, which launched its adviser site in April 2011.
“If we can help a consumer look up an RIA firm and see how that stacks up to advisers in a similar asset range, that's really cool,” Mr. Alfred said. “If we can do it accurately and merge it with our other data, we can add a lot of value.”
But accuracy might be the rub.
The firm attempts to collect information on every registered representative, investment adviser representative and advisory firm by consolidating data from registration and disciplinary databases.
ROUGH START
Brightscope took a lot of heat from advisers when it rolled out its adviser site. Advisers claimed that the firm published incomplete information and then wanted to charge them to fix it.
Mr. Alfred said those issues have been cleared up and that Bright-scope never charged to change inaccurate data.
This time around, the firm is manually collecting fee schedules from Part II of ADV forms, which are free-flowing text.
BAD MEMORIES
Richard Ferri, founder of Portfolio Solutions LLC, said he was a victim of inaccurate Brightscope data and got the site to remove him about six months ago. The website showed he had a relatively low level of experience, even though he is a 25-year industry veteran, Mr. Ferri said.
“I'm not against [showing fee data] if it's correct and doesn't hurt anybody,” he said, noting that the error apparently occurred because he opened a new office in Texas in 2007. The Brightscope system apparently conflated the office registration to Mr. Ferri's own start date. He found out when he got an e-mail from a prospective client who was concerned about his lack of experience.
Mr. Alfred said he couldn't comment on Mr. Ferri's case but said Brightscope does a lot of “nitty-gritty” work to fix records. “A machine can't see through all the complexity” of something like multiple registrations and offices, he said.
Regarding Mr. Ferri's misinformed prospect, “That's exactly what we don't want to have happen,” Mr. Alfred added.
As far as the new fee information goes, Mr. Alfred said Brightscope is working on procedures to verify the data.
Michael Kitces, director of re-search at the Pinnacle Advisory Group Inc., likes the idea of more fee transparency.
“In my cursory glances over the years, very few advisers put their fee schedules on their websites,” he said.
Advisers should provide links to their ADVs, Mr. Kitces argued, noting that those are hard to find, leaving potential clients in the dark about fees until after they actually have a face-to-face meeting.
Advisers also worry about consumers' making fee comparisons in the absence of information about what services are provided. Some investors might just go to whatever firm looks cheapest, said Robert Kargenian, founder of TABR Capital Management LLC.
“But just focusing on the fee isn't really enough information to make an intelligent decision,” he said.
Brightscope should show what services advisers offer so that consumers can make a meaningful comparison, Mr. Kitces said.
