Reuters Money

Brightscope, which made a splash two years ago with its online performance measurement tools for 401(k) plans, is launching a free service on Tuesday to help people research and shop for financial advisers.

Brightscope’s new service could give a needed jolt of transparency to the financial advisory field, where finding an adviser is often a hit-and-miss process driven by word-of-mouth and referrals. And consumers find themselves wading into a market where almost anyone can hang out a shingle and start providing financial advice; planners may have any number of certifications or titles attached to their names, but none are required.

Meanwhile, the advisory marketplace is on the cusp of dramatic change as Washington works to write new rules on the fiduciary responsibilities of advisers, spurred by the Dodd-Frank financial reform act.

Brightscope hopes its success in the 401(k) market can be replicated in the advisory industry. Brightscope goes deeper than most other 401(k) data sources by leveraging the actual audit reports that all plans file with the U.S. Department of Labor on criteria including matching contributions, expense ratios and performance. Brightscope then assigns a simple numerical rating to all the plans and makes the scores available to investors for free.

Brightscope Advisor Pages aims to bring that kind of transparency to the adviser shopping process. The site pulls together a variety of public data that most consumers would have trouble finding into a single view, and allows users to search and compare advisers using criteria such as location, qualifications, amount and types of assets under management, area of specialty, legal disputes and formal complaints.

All of this information is publicly available from sources such as the Securities and Exchange Commission or FINRA BrokerCheck, but the information can be difficult for dig up. And some of the data is buried in PDF documents that search engines can’t crawl.

Advisor Pages could have its biggest impact by simply making a wealth of data on advisers visible to major search engines, says Mike Alfred, who co-founded the company with his brother Ryan. “One of our big objectives is to change the business by adding search visibility. Our data will be better and more prominent than what’s on an advisory firm’s websites or on a LinkedIn profile.”

Brightscope also is reaching out to advisory firms to get them to add more information to their company and individual profiles on the site. Longer-range plans also call for adding information on fees and actual performance — the latter through cleansed, aggregated data on individual client portfolios.

Working with advisory firms will be a key part of the business model. “We need to get much more information direct from the firms if we want this to be the source in the industry,” Ryan Alfred says. “We have a verification method for letting a firm claim its profile and add some of their own information. We think most of them will be interested, especially when they see that our pages go higher in search engine rankings than their own pages.”

Like Brightscope’s 401(k) business, the Advisor Pages business model likely will call for providing a good deal of free information to consumers. “We’ll monetize it through sales of enterprise software to the firms that they can use to help with sales, retention and recruiting,” Ryan Alfred says.

Brightscope has an opportunity here to accelerate the pace of change in the advisory marketplace. Today, the business is divided into two camps — one made up of Registered Investment Advisers (RIAs), who have legal fiduciary duty to put the client’s interests above all else, and the other composed of broker-dealers who work under a weaker client “suitability” standard.

Currently, RIAs are overseen by the Securities and Exchange Commission, while Wall Street brokers are overseen by FINRA. But the extension of fiduciary responsibility poses big challenges to the traditional broker-dealer model.

And the introduction of greater transparency and consumer access can only add momentum to the shift towards RIAs, who face far fewer restrictions on communications and marketing. “This inevitably will spur broker-deals to change their approach more quickly than they would otherwise,” says Mike Alfred. “If they don’t, they’re going to lose out to RIAs.”