When people go to the web to research anyone from a plumber to a lawyer they might hire, they can find a bevy of online reviews to guide their decisions.
That's not quite the case yet with financial advisors. But Rishi Bharathan, the CEO of the client-recruiting service WiserAdvisor, thinks that's all about to change.
Hence WiserAdvisor's decision, announced Wednesday, to acquire
"IndyFin's platform allows advisors to use reviews and ratings to create trust and obtain credit online," Bharathan said. "In every other industry, it's reviews that drive a lot of decision making."
IndyFin, which was founded by the former Merrill Lynch advisor Akshay Singh, introduced what it calls its Investor Experience Platform in March of 2022. Among other things, the service allows financial planners to display customer reviews and ratings on a five-star scale.
Singh said IndyFin's expertise with testimonials will prove a good complement to WiserAdvisor's client recruitment and online lead-generation services.
"By combining our platforms, we become the first in the industry to offer growth through referrals and significantly increase online visibility, all while fostering consumer trust," he said in a statement.
Read more:
Bharathan declined to say how much WiserAdvisor paid for its purchase of IndyFin, which closed last week. He said there are no plans for layoffs and that the two companies combined will have roughly 30 employees.
Advisors have been slow to embrace online reviews and testimonials in part because they were barred from using them until May 2021. That's when the Securities and Exchange Commission adopted its
Bharathan said the industry has appeared hesitant to embrace its new freedoms, in part for fear of overstepping limits on what they can say in their marketing materials. In March, the SEC
Bharathan predicted that advisors who let compliance anxieties steer them away from the use of online testimonials and ratings will eventually be left behind.
"Reviews are coming into almost every facet of decision making," he said. "It's only a matter of time before it comes into this space. We feel we know we are in a position to help advisors leverage that and get ahead of the game."
Andrew Besheer, the director of the consulting firm Aite-Novarica Group's wealth management practice, said advisors tend to be conservative and acutely attuned to how their clients and the broader public are likely to perceive them. And there's likely another reason for planners' apparent reluctance to embrace client reviews and ratings: their relatively advanced age.
The average age of financial advisors was 57 in 2022,
"You will see, as that average age slowly shifts down the ladder, you will have more testimonials and more aggressive marketing," Besheer said. "It's a matter of adoption by the folks who are most comfortable doing it."
Read more:
Even so, Besheer said he's skeptical online reviews and marketing will ever become advisors' main way of finding new prospects. He pointed to internal research from a survey Aite-Novarica conducted of 477 wealth managers of various stripes in December 2021 suggesting that advisors tend to rely most on referrals from existing clients when trying to drum up new business.
The 150 registered investment advisors who responded estimated they secure nearly 28% of their new business, on average, from their top 20 clients and 30% through the rest of their clients. The polled advisors estimated only about 19% of their new business came from their own marketing efforts.
If any resource for new client referrals grows in importance, Besheer said, it's likely to be centers of influence — professionals like lawyers and accountants.
"The best sources of new clients continue to be referrals from your existing clients," Besheer said. "Centers of influence are likely to grow in importance as advisors build their practice around relationships with these other professionals."
Aite-Novarica's results have found corroboration in other studies. The Investment Adviser Association, which represents more than 600 advisory firms, reported in a study
Using data drawn from firms' annual form ADV filings, the IAA found that
Bharathan said he's confident that IndyFin — which will continue operating under its own brand name — offers features that will lead advisors to reconsider the benefits of client testimonials and ratings. One of the service's priorities is to keep planners from running afoul of the SEC's prohibition on "cherry picking" — the practice of displaying only favorable views and burying unflattering ones.
IndyFin guards against that, Bharathan said, by insisting that advisors who choose to use testimonials and ratings publish all of them. Financial planners who use the service can choose not to display reviews.
"But if they choose to publish, they have to publish all of it," he said.
Advisors who do keep the reviews private can nonetheless survey them to learn ways they might improve. Critical client testimonials help planners see how they're falling short from their clients' perspective.
For similar reasons, he said, advisors who try to solicit reviews by sending surveys to clients can't cherry pick who receives the inquiries. Bharathan said the reviewers are kept anonymous because few advisors want to broadcast the names of their clients.
"Advisors are not going to open up the book of business they have built up over the years," Bharathan said. "And rightfully so. They guard that and keep that very close to their chest."
Brian Thorp, the founder and CEO of the Austin, Texas-based lead generation service Wealthtender, said he expects acquisitions like WiserAdvisor's purchase of IndyFin to become more common. Thorp said WiserAdvisor was faced with a simple choice: It could try to build its own customer review system to compete with IndyFin's. Or it could simply buy IndyFin's and bolt it on to its existing services.
"IndyFin did a nice job of building the platform," Thorp said. "This gives WiserAdvisor customer reviews at a fraction of what it would cost to do internally. And I think we're going to see more opportunistic acquisition by other players."
