WalletHub.com, a website that allows consumers to write reviews of various financial products, will soon be allowing “Yelp-type” reviews of financial advisors on their web site.
SEC: Investors “unmuzzled”
The Securities and Exchange Commission (SEC), in an Investment Management Guidance Update last week, said financial advisors can feature investor comments in their promotional materials and on web sites such as WalletHub. “The directive effectively serves to unmuzzle consumers, allowing community-based learning to promote improved financial decision-making,” the site said in a statement.
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“The SEC’s recent guidance represents a major breakthrough for consumers,” said WalletHub CEO Odysseas Papadimitriou, a former Capital One senior director. “We are now free to compare the professionals who manage our money with the same level of discerning and transparency that has long been available in other segments of the retail market – from restaurants to consumer electronics.”
Difficult for unscrupulous financial advisors to operate in the shadows
Saying the new rules would make it more difficult for unscrupulous financial advisors to operate in the shadows, Papadimitriou said “the unscrupulous segment of the industry is out in the open, vulnerable, while the effective and honest professionals can move freely amongst consumers.”
“We understand that use of social media has increased the demand by consumers for independent, third-party commentary or review of any manner of service providers, including investment advisers,” the SEC said in the Guidance Update. “We recognize that social media has facilitated consumers’ ability to research and conduct their own due diligence on current or prospective service providers. Through this guidance, we seek to clarify application of the testimonial rule as it relates to the dissemination of genuine third-party commentary that could be useful to consumers.”
Policing of comments
The SEC indicated that endorsements must not be influenced by the financial advisor, but did not indicate how this issue would be policed. Yelp has significant problems with restaurant and store owners posting positive reviews of their own service under a false identity, as well as posting negative reviews of their competition.