A firm initially aimed at helping consumers choose the best credit cards and gift cards is now looking to do the same for those seeking broader personal-finance help, including selecting a financial adviser.
Evolution Finance, parent of CardHub, formally launched WalletHub.com this month as a “personal-finance social network” where consumers can read and write reviews of financial companies, products and professionals.
The site, which spent a year in beta form, includes a separate index of financial advisers. Today, consumers can search advisers listed on the site, filtering by location, name or specialty — such as whether the adviser offers college planning, sells annuities or provides
estate planning.
WalletHub.com members who say they have done business with the adviser can offer a review. To date, very few reviews, if any, have been done, and adviser online technology expert Michael Kitces doesn't think that's likely to change — even when the site has been around for more than a few days.
Today, he told readers of his blog, “Nerd's Eye View,” that such review sites
are useless in the advisory industry because even if 1% or 2% of a firm's clients offer an opinion, that would be only one or two reviews for a client base of 100. This “isn't enough review quantity to be credible,” Mr. Kitces said. Not to mention it's a stretch to expect 1% to 2% of any population to comment on their services when you look at typical review rates, he said.
It's also unclear how advisers are chosen to be listed on the site. A WalletHub.com spokeswoman said they were derived from publicly available sources but would not say which ones.
CardHub and WalletHub.com founder Odysseas Papadimitriou said in a release, “The Great Recession was a stark wake-up call to the need for greater transparency in the personal-finance industry,” and, “No longer will unscrupulous financial advisors be allowed to hide in the shadows.”
Of course, the Securities and Exchange Commission and state security regulators already require investment advisers to register and provide certain information that they make publicly available so anyone can view whether investor claims or other disciplinary actions have been filed against an adviser. The
Financial Industry Regulatory Authority Inc. does the same for brokers.
It's unclear how a review site with an opinion or two is going to do better. If a client has an issue with an adviser or broker, they would do better to contact the SEC or Finra than to rant about them on WalletHub.com.
And if it's a positive review, the adviser can't use that for marketing or they risk violating rules that forbid testimonials.
