Former financial advisor launches client testimonial and referral service

As financial advisors aim to tap into opportunities afforded under the SEC’s recent update to its rules about client testimonials, a new fintech company launched to help them do so.

Indyfin, a Dallas-based firm founded by ex-Merrill Lynch advisor Akshay Singh, opened its Investor Experience Platform on March 3 after venture capital firm Leo Capital led a seed capital raise of $2.2 million. That represents the fintech’s first institutional round of funding.

After the SEC adopted its “modernized” marketing rule in December 2020 that opened the door to practices making use of client reviews in advertising, Singh huddled with securities attorneys to build a compliant service for independent advisors that squares with the guidelines.

The service acts as a mixture of a matchmaking and referral network for clients and the host of an online profile resembling those of Yelp and Airbnb for advisors. Neither pay Indyfin any fees initially; only advisors will pay an amount that’s comparable to the RIA referral networks of Charles Schwab and Fidelity once the client hires them, Singh said in an interview. Participating advisors — there are hundreds in the firm’s pipeline after pilot demos — will ask their clients to review them, but they won’t have any control over the results or presentation on their profile. Indyfin will match up prospective clients with potential advisors through a survey.

With a good deal of confusion about the 430-page rule and criticism among many smaller practices that are often shut out of existing RIA referral programs due to minimum asset requirements, Singh wanted to give independent advisors access to the client leads and a means of using testimonials compliantly.

The service “helps advisors grow and helps consumers make the right decisions,” he said.

“What's lacking in the industry today is transparency,” Singh said. “It just makes the consumer trust that advisor much more easily. They're just browsing all over the internet. There's no way for the consumer to trust the advisor.”

Indyfin

To establish the connection, Indyfin asks prospective clients a series of questions to find out information like their location, the services they’re seeking, their investable assets and other details. Then, the software matches them with potential advisors, whose profiles include verified client reviews, listings of their relevant areas of expertise and whether they work with a particular niche of customers. The reviews feature overall ratings on a five-star scale, as well as about two dozen other metrics that the prospects can use to assess the advisor.

Once the clients have selected a potential advisor and booked a meeting, a member of the Indyfin staff reaches out to answer any further queries and remind them of questions to ask the practice in order to find the right fit.

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“We've been very pleasantly surprised with how advisors and clients are embracing this opportunity to provide feedback,” Singh said, noting that the questionnaires supply roughly 25 different data points for each advisor. A sample advisor profile he showed during a demo for Financial Planning displayed about 20 different reviews from clients.

Many practices have already adapted to online reviews listed by Google and Yelp by tracking them and, in certain cases, responding to them like a local restaurant or another business would. Since those reviews aren’t solicited by the practices, they’re not affected by the rule. Another lingering problem stems from the fact that most customers of businesses don’t do any online reviews. And compliance concerns often emerge when advisory practices are considering a step as routine as creating a decent website. The new rule became effective on May 4, 2021.

“The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology,” then-SEC Chairman Jay Clayton said in a statement upon adoption of the rule. “This comprehensive framework for regulating advisers’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors.”

Indyfin

A service like Indyfin’s wouldn’t have been possible under the old rules, according to Compliance Risk Concepts founder Mitch Avnet. He points out that the ability to use testimonials and even paid testimonials comes with the duty to disclose any compensation involved with the recommendation or referral and to vet any vendor that RIAs may use for such purposes through a documented due diligence process.

“The advisor has to be really careful not to select certain clients to give reviews to ensure that it's truly independent. You can't cherry pick,” Avnet said. “While they loosened the reins in terms of allowing this now, the disclosure issues are going to be front and center.”

Indeed, a blog from last year by fellow wealth compliance expert Scott Gill, the founder of Synergy RIA Compliance Solutions, lists five different boxes for practices to check if they’re trying to make use of testimonials under the SEC’s new marketing standards.

“Many industry professionals feel this change was long overdue,” Gill wrote. “I consider myself among them. However, I also understand that with additional rights, comes added responsibilities. So, I remain cautiously optimistic about this change. In other words, I think I’ll wait until the examination findings and deficiency letters begin to emerge before tossing confetti and drinking champagne.”

The first amendment to the SEC’s marketing rules since 1961 gives advisors the chance to restart their entire approach, according to Kelly Igoe, the director of compliance for RIA in a Box.

“Every piece of advertising has to be looked at with a brand new fresh pair of glasses,” Igoe said.

Singh has taken some potential issues off advisors’ plates by working with legal advisors to ensure that Indyfin complies with the rule’s requirements, he says. The present moment is “an exceptional time in the industry,” Singh said.

“Finally, we're moving to a place where independent financial advisors will get the spotlight powered by the feedback from their clients,” he said. “We're giving the consumer that transparent data and the ability to make a choice.”