Website offers consumer reviews of advisers

Fabeetle.com, a website that allows clients to rate, review and research financial advisers, has the potential to become a third-party search and marketing hub for both consumers and advisers that one day could compete with Finra's BrokerCheck.

Fabeetle.com, a website that allows clients to rate, review and research financial advisers, has the potential to become a third-party search and marketing hub for both consumers and advisers that one day could compete with Finra’s BrokerCheck.

On the flip side, the site, now in live beta, poses regulatory and compliance challenges, especially for brokers and registered investment advisers.

The controversy that has been brewing is over one of fabeetle.com’s chief features: consumer-generated reviews of advisers.

The question that has been raised by industry observers is whether these comments and reviews will be considered testimonials and therefore advertising, which the Financial Industry Regulatory Authority Inc. prohibits.

Spokesmen at Securities and Exchange Commission and Finra said that they weren’t aware of the site prior to calls seeking comment about it. This underscores the challenges that the Internet is adding to the already difficult task of policing the financial services industry.

Finra spokesman Brendan Intindola declined to comment directly on the site or its methodology.

Finra does, however, suggest that consumers proceed with caution when using such sites.

“When checking the backgrounds of financial services providers, customers should be aware of the original source of information. Equally important is knowing how the information is updated, how frequently and by whom,” said executive vice president Jay Cummings.

“The only source that assures customers get current information is Finra’s BrokerCheck,” he said. “It is updated daily, and it provides an abundance of useful information, including disciplinary history and the different types of licenses held by registered individuals.”

These issues aside, fabeetle.com is now publicly accessible and free to both consumers and advisers. It was launched with basic name and location data for 650,000 Series 7 licensees, according to site founder Brandon Gadoci.

When asked about the seemingly high number of advisers, Mr. Gadoci, a former registered representative, was quick to point out that the site goes beyond producing brokers.

“Common speculation is that there are roughly 300,000 producing brokers in the country, which is somewhat in line with the numbers we have. The non-producing portion of the list includes other financial professionals who might not fit the common definition of financial adviser but are still considered a registered representative, according to Finra,” Mr. Gadoci said.

Once registered on the site, consumers can perform searches for advisers, write reviews of them, provide numeric ratings (one to five stars), vote thumbs-up and thumbs-down on the quality of reviews from others, and post open-ended questions in a separate “answers” section.

Users can perform a quick search for advisers based on location, for example, or an advanced search for advisers based on name, central registration depository number, gender, specialty and several other criteria.

Advisers can find their listing — if one is present — and add additional information. If they aren’t in the database they can create their own profile, Mr. Gadoci said.

As to the hot-button topic of consumer reviews, he argued that the guidance found in Finra’s Regulatory Notice 10-06 leaves some aspects of the situation open to interpretation.

“The general consensus is that financial advisers shouldn’t use the recommendation feature on LinkedIn. Yet if you search for financial advisers there through their services search, you’ll find over 500 financial advisers, with some that have upwards of 30 recommendations from clients, many at big firms,” Mr. Gadoci said.

He added that Finra must be aware of this, but “because of the vagary that surrounds all this, the recommendations remain.”

“What we think is that the majority of financial advisers want the ability to display what their clients think about them publicly and there are many examples of this online,” Mr. Gadoci said. “Our goal was to set up fabeetle in such a way that this was possible.”

Mark Astarita, an attorney with Beam & Astarita LLC, a law firm specializing in the securities industry, said that the issues will ultimately work themselves out.

“I can’t really see the SEC or Finra going after an adviser for a recommendation on a website that they never asked for,” he said.

There are other aspects that must also be resolved, Mr. Astarita said. These include the potentially contentious issue of negative reviews, as well as more technical considerations such as archiving, retention and retrieval policies.

“There are a lot of nuances to this, but we made it through the same thing with e-mail and instant messaging, and those have been resolved,” Mr. Astarita said.

Mr. Gadoci said that any content that an adviser can prove is false, or content that is deemed hateful, unlawful, obscene, defamatory, or threatening is subject to immediate removal by his company.

Russ Thornton, founder of Thornton Wealth Management, which manages $25 million, said that the only advisers who need to fear a site such as fabeetle.com are those with something to hide.

“I think we, as advisers, need to quickly get more comfortable with the notion of “living in public.’ With the rapidly increasing adoption of sites such as Facebook, LinkedIn, Twitter and fabeetle.com, clients will have ample opportunities to publicly share their opinions about you and their other product/service providers,” he wrote in a post to the IN Tech blog.

Mr. Thornton said that if sites such as fabeetle.com can survive, and remain open and honest forums, they would prove to be a good marketing opportunity for small firms such as his.

Fabeetle is only one of a number of for-profit find-an-adviser sites and registries.

Sites that share some similarities include FinanceAnswers.com, nTrustProfiles.com, PaladinRegistry.com, and WiserAdvisor.com. Another competitor is Advisorbackgroundcheck.com, which drew the ire of some advisers over the company’s sales practices, which have since been amended.

(Visit our blog at InvestmentNews.com/technology, where fabeetle.com’s founder has provided in-depth responses to questions that came up during the reporting of this story.)
E-mail Davis Janowski at [email protected].