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- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
Web-based software “disruptor” BrightScope Inc., which has gained a name for shedding light on the opaque 401(k) industry, has brought advisor industry pundit Michael Kitces to its advisory board just before it launches a fee disclosure feature later this year on BrightScope Advisor Pages.
Kitces, partner and director of research at Pinnacle Advisory Group, and publisher of the Nerd’s Eye View financial planning industry blog, will join fellow advisory board member Josh Brown, the "Reformed Broker," in offering BrightScope insights on how it can refine its Advisor Pages’ ADV fee disclosure feature.
“BrightScope is a disruptor,” said Chip Roame, managing partner of industry consultant Tiburon Strategic Advisors, in an email when asked to comment on Kitces’ affiliation with BrightScope. “BrightScope will disrupt the advisor industry, and become a portal for advisor data.”
BrightScope bills itself as “the leading independent provider of retirement plan ratings and investment analytics to participants, plan sponsors, asset managers and advisors in all 50 states.” For example, the company recently released a survey of the Top 25 401(k)s for New York City-based companies, which names names and lists average account balances and the 401(k) plans’ top funds.
The company has rated more than 46,000 retirement plans, spanning 30 million workers and $2 trillion in assets, and provides information on more than 600,000 financial advisors. It gets its data directly, either from plan sponsors, or from publicly available sources ranging from the Department of Labor to the Securities and Exchange Commission.
BrightScope Targets Transparency
Now, BrightScope is targeting the transparency, or lack thereof, in the advisor industry.
BrightScope launched Advisor Pages in 2011 as an online and publicly available directory that helps consumers conduct their own due diligence on financial advisors. The company believes it can accelerate the growth of the financial advisory industry and increase its legitimacy by creating standards around performance, experience, certifications, fees and conduct.
“The BrightScope team and I have similar beliefs that right now there is a chance to develop data-driven tools and information for consumers that fundamentally change the industry with a new level of transparency," Kitces said in a statement. "I’m excited to work alongside the team to further advance that cause.”
Roame, who noted that BrightScope is a sponsor of Tiburon’s popular semiannual CEO Summits, said that BrightScope’s data orientation allows the firm multiple target markets because it can “collect, enhance and massage” 401(k) plan data, and then sell that information to 401(k) plan administrators, plan sponsors and financial advisors who want to market to underperforming 401(k) plans.
“Their more recent move into financial advisor data is parallel,” Roame added. “By managing a database of thoughtful advisor data, they can sell this data to consumers, other advisors and firms that want to serve advisors.”
Lead Generation in Reverse
Along with services such as AdviceIQ and My New Financial Advisor, BrightScope serves as a lead generation machine in reverse for advisors, according to Ellen Uzelac in “Here’s Your Lead Generation Machine” in the February issue of Research magazine. These services act as “the ultimate referral engine, marking a reversal in the way investors and financial advisors historically connect. Instead of the advisor reaching out to the prospective client, it’s the other way around,” she writes.
Uzelac goes on to quote Kitces, who says that technology as created new pathways for creating leads and passing them on to advisors. “There’s a lot more opportunity to create some scale by doing it in this environment because we can reach a whole lot more people. Certainly, you see a shift in that direction. It’s a really efficient platform,” Kitces says.
Mike Alfred, CEO and co-founder of BrightScope, said that Kitces was at the forefront of many complex issues coming to light as the financial planning industry matures, which is why BrightScope wanted him.
“His forward-thinking approach to social media and digital marketing within the industry, combined with his tremendous knowledge of the space and his passion for elevating industry standards, will be a terrific asset to BrightScope and we are honored to have him on board,” Alfred said in a statement.
Read Michael Kitces’ thoughts on disruptive trends in planning software at AdvisorOne.