Brightscope site rates financial advisers

The financial planning field is entering a phase of major growth in response to rising demand for help securing retirement in hard times. Several recent surveys show that financial planning firms are gearing up to boost their staffs by as much as 30 percent in the coming year.

But from the client perspective, finding the right financial planner continues to be a bewildering task. Almost anyone can hang out a shingle and dispense advice, and compensation models range from commission-only planners to those who are paid an hourly fee for their services. Planners come with an array of certifications or titles attached to their names, but none are required. Perhaps most important, it can be difficult to assess a planner's track record or whether there's been any history of ethical lapses.

And there hasn't been a central online marketplace where consumers can view ratings and recommendations -- until now.

Brightscope, a young company that made a splash two years ago with its online performance measurement tools for 401(k) plans, recently rolled out a new site, Brightscope Advisor Pages (bit.ly/i1OM6L), which aims to help people research and shop for financial advisers.

Brightscope's new service could give a needed jolt of transparency to the financial advisory field, where finding an adviser is often a hit-and-miss process driven by word-of-mouth and referrals.

Meanwhile, the advisory marketplace is on the cusp of dramatic change as Washington works to write new rules on the fiduciary responsibilities of advisers, spurred by the Dodd-Frank financial reform act.

With Advisor Pages, Brightscope hopes to replicate the success it already enjoys in the 401(k) market. Brightscope's 401(k) database goes deeper than most other sources by leveraging the actual audit reports that all plans file with the U.S. Department of Labor on criteria including matching contributions, expense ratios and performance. Brightscope then assigns a simple numerical rating to all the plans and makes the scores available to investors for free.

Advisor Pages aims to bring that kind of transparency to the adviser shopping process. The site pulls into a single view a variety of public data that most consumers would have trouble finding, and allows users to search and compare advisers using criteria such as location, qualifications, amount and types of assets under management, area of specialty, legal disputes and formal complaints.

All of this information is publicly available from sources such as the Securities and Exchange Commission or FINRA BrokerCheck, but the information can be difficult to dig up. And some of the data is buried in PDF documents that search engines can't crawl.

Advisor Pages could have its biggest impact by simply making a wealth of data on advisers visible to major search engines, says Mike Alfred, who co-founded the company with his brother Ryan. "One of our big objectives is to change the business by adding search visibility. Our data will be better and more prominent than what's on an advisory firm's websites or on a LinkedIn profile," Alfred says.

Advisor Pages has generated some criticism and controversy since its launch, with some advisers complaining that the information Brightscope is displaying is either inaccurate or out of date. Brightscope acknowledges that there's work to do to improve the site's quality, since the site launched strictly with publicly available data.

But its intent all along has been to work with advisory firms to get them to add more information to their company and individual profiles on the site and make corrections where appropriate. The guess here is that after the grumbling settles down, advisory firms will work with Brightscope to assure the accuracy of firm profiles.

Working with advisory firms will be a key part of the business model. "We need to get much more information direct from the firms if we want this to be the source in the industry," Ryan Alfred says. "We have a verification method for letting a firm claim its profile and add some of their own information. We think most of them will be interested, especially when they see that our pages go higher in search engine rankings than their own pages."

The company also has longer-range plans to add information on fees and actual performance -- the latter through cleansed, aggregated data on individual client portfolios.

Like Brightscope's 401(k) business, the Advisor Pages business model likely will call for providing a good deal of free information to consumers. "We'll monetize it through sales of enterprise software to the firms that they can use to help with sales, retention and recruiting," Ryan Alfred says.

Brightscope has an opportunity here to accelerate the pace of change in the advisory marketplace. Today, the business is divided into two camps -- one made up of Registered Investment Advisers (RIAs), who have legal fiduciary duty to put the client's interests above all else, and the other, composed of broker-dealers who work under a weaker client "suitability" standard.

Currently, RIAs are overseen by the Securities and Exchange Commission, while Wall Street brokers are overseen by FINRA. But the extension of fiduciary responsibility poses big challenges to the traditional broker-dealer model.

And the introduction of greater transparency and consumer access can only add momentum to the shift toward RIAs, who face far fewer restrictions on communications and marketing. "This inevitably will spur broker-dealers to change their approach more quickly than they would otherwise," Mike Alfred says. "If they don't, they're going to lose out to RIAs."

Mark Miller's Retire Smart column is carried on Tribune Media Services.