A new online service touts itself as a social network for financially minded individuals. WalletHub, an offshoot of CardHub, which is an online store for credit and gift cards, launched the new service on Monday.
The site was in beta testing for a little over a year before its launch, founder Odysseas Papadimitriou told ThinkAdvisor on Tuesday.
“We identified a big vacuum in the market where there are no reviews for financial advisors online,” he said. “You can find a million reviews for the latest iPhone, but for the person who handles your retirement, you cannot find a single review.”
The site lists about a quarter of a million financial advisors and firms, according to Papadimitriou. The list is compiled through publicly available information.
Users can also compare rates on financial products like credit cards or loans, and can rate financial institutions. However, consumers can also rate and review individual advisors — even though the advisors themselves can’t participate on WalletHub.
“Unfortunately, the SEC has, according to some legal experts, overreached when it comes to how they have interpreted that law so they consider reviews testimonials as well,” Papadimitriou said. “That’s a problem in terms of advisors not being able to actively participate on the site, at least the ones that are regulated by the SEC. We are aware of this issue; however, we feel that it’s a higher priority to bring transparency to this market.”
Papadimitriou recommended that advisors featured on WalletHub who are concerned about running afoul of the SEC’s rules on using testimonials “consult with their compliance department to figure out whether they can play an active role or not. There are some that have taken the viewpoint that they can as long as there are no reviews, and if reviews do show up then maybe they will stop participating. Unfortunately, it would impact our credibility if we started removing reviews that consumers have written.”
He added, “We make an analogy that we are the Yelp of personal finance. We have all banks, all insurance companies, a quarter of a million of financial advisors and their firms and adding more as we speak. The vetting process will happen from the marketplace.”
He compared clients of a newly licensed advisor to diners at a new restaurant. “When a restaurant first opens, some brave consumers need to go and give it a try. Similarly, when a new financial advisor gets licensed, they will be on WalletHub, but we hope that when they start getting clients those clients will start sharing their experiences and educate fellow consumers.”
Nancy Lininger, founder of The Consortium, a compliance consulting firm, said she’s heard concerns about Yelp before. “I have had advisors ask about Yelp recommendations in regards to the testimonials prohibition,” she told ThinkAdvisor by email on Thursday. “My response is that you (the advisor) control Facebook, LinkedIn and similar social media sites. When in your control, you must do what you can to disable recommendation or like features, or to take recommendations down if posted.”
Unfortunately, with third-party sites, it’s out of advisors’ hands. Lininger said, “Yelp, or newer similar services, are not under the advisor’s control. There is no way to stop unsolicited postings to those sites. The only thing you can do is not to encourage clients or others to post to these third-party sites.”
Similar to the way Twitter users can “follow” people and companies, WalletHub users can follow various news outlets to customize the news that appears on a dedicated page in their profile. Initially, news is automated through the outlets’ RSS feeds, but those who want to take over their profile can do so by submitting a business listing, which will then be confirmed by the WalletHub team as a legitimate source. Papadimitriou said currently a “handful” of blogs and news outlets have taken control of their listing.
“This is a great way to attract readers that are focused on financial-related news,” he said. “We are trying to attract a community of people who want to talk about saving money, about making smarter financial decisions, not about what they had for breakfast.”
In addition to the Yelp-like review element of WalletHub and the Twitter-like element of the news page, Papadimitriou said, “The third element is companies will essentially be able to take over their profile, professionals can list their qualifications and services they offer, and that resembles LinkedIn. If you will, WalletHub you can think of as a child of LinkedIn, Yelp and Twitter: a ‘Frankenstein’ child but with a focus on personal finance.”
He concluded, “When we go to a restaurant or visit a hotel, we take for granted that we can go to TripAdvisor for thousands of reviews. When it comes to much bigger money issues we, for whatever reason, as you mentioned some of it has to do with regulatory factors, have been completely isolated from transparency.”