BrightScope sticks to its guns as it responds to outspoken critics of its Advisor Pages

Why don’t Michael And Ryan Alfred post their disciplinary history? How would they rank as advisers? It’s ironic that they are not subject to the same scrutiny. Why is it that the “industry” continues to fall for their marketing prowess? Whatever happened to investigative journalism???

They started by strong arming 401k advisers and have now moved on to individual advisers and firms. Seems like they are legally culpable if they are distributing false information (incorrect AUM’s, etc…). Why do they not allow the “incorrect” data to be fixed free of charge or update it on a timely basis? Their answers thus far seem half-cooked and made up as they go along. Seems to match their business model(s). It is flat out wrong and I believe criminal that you must pay a site to update your correct information which is already a matter of public record!

Eventually the tide will come in and the Alfred’s will have their day of reckoning.

The Alfreds have taken the low road and chosen to be evil as a business plan. There is no legitimacy to their business model and their strategic intent is to compile data which they hope will be valuable in the future. What’s interesting is Google started this model years ago AND EVEN INFRINGED ON TRADEMARKS AND COPYRIGHTS. However, Google settled with the ASSOCIATED PRESS, AMERICAN SOCIETY OF MEDIA, VIACOM, THE NEW YORK TIMES, and many others. Google could afford to legally push the envelope – the Alfreds and their bit-player backers cannot. What’s more, they have chosen a very narrow vertical which has limited potential. Last, when you choose to be evil there will be a lot of negative information on the web which, in turn, will scare away potential customers.

Evil? Criminal? Day of reckoning?? I think you guys are getting a bit carried away, don’t you think? Either that, or perhaps we’re actually on to something after all.

You are not on to anything – this information has always been available. You are VERY, VERY late to the information commerce game. The problem is INVESTORS IN BRIGHTSCOPE DO NOT KNOW THIS – you have sold them a story that was told to Venture Capitalists years ago. Now you are stuck since you raised this money and now you have to act like a “disruptive” technology when you are nothing more than an extortionist. This is nothing disruptive about your business – only sinister. You will get some hits with the controversy associated with your site but that is it.

It’s rather ingenious how you’ve managed to make a comment without actually making a point. I think you’re the real evil genius here. Congrats.

PS Can I call you Calvin?

It’s interesting how shady people like to hide behind pseudonyms and the like. If you’re not afraid, come out of the darkness and identify yourself.

Mr. Coolidge, it does appear to me that what BrightScope’s doing is indeed a bit disruptive — our comment section takes some serious controversy to get even es much action as this.

I’m delighted to have one of the co-founders of BrightScope here to reply to reader comments, and I think we can make constructive use of this opportunity, so let’s avoid the unfriendly tone that web comment threads seem to converge on if we can.

Mike: It does seem curious that advisors who pay can update their info and ones who don’t cant’t. Is there a process for verifying the correctness of what a paying advisor inputs, or are they free to publish any AUM numbers they want?

Also, what do you estimate will be the typical update lag-time for non-paying advisors who change their AUM numbers on their ADV?

Nevin

Nevin,

It’s actually not correct that advisors who pay to claim their profile can update information that advisors who do not claim their profile can’t update. This is a piece of misinformation that started spreading like a virus last week. We will be publishing a blogpost shortly that clarifies this point as well as a number of other issues related to the Advisor Pages. We’d like to correct the record. To make sure it’s done right, we will be publishing it directly on our own blog. I’ll post the link here if that doesn’t violate your policies.

Mike

Dear Mr. Nevin Freeman: Please be advised that venture capitalists use the term “disruptive” in a much different manner than media. For example, when online discount brokers first emerged in the industry it was a disruptive business model in that it bypassed the wire houses for considerable savings and economic efficiencies. Similarly, when RedFin offered online real estate brokerage with rich content for a fraction of the commission a traditional realtor it was considered very a disruptive business model. It is important to note in both of these examples the business models work within the regulatory environment. Brightscope is infringing on Trademarks which in terms of a business plan is not disruptive. Infringing on Trademarks for the sake of free publicity and a ransom is controversial – not disruptive.

I see you, Michael S. Alfred, has been added to the database now. But for some reason both you and your brother’s data is still incomplete. I see that both of you have NOW disclosed the customer dispute, but what is it? If I do a FINRA search I can read all about them. How is your site protecting consumers if you simply mention a dispute in passing?

One would think, since you are both owners of the company, that you two would have the most complete profiles on the site. But that does not appear to be the case. How do you and your brother rate on the “Brightscope Advisor Metrics” scale? And how does this “black box” come up with the rating? Is it the same “black box” that shoots out ratings for 401k plans just tweaked for advisers? What is the formula?

In taking a look at your site, contact numbers are STILL not listed. Part of your high pressure sales tactics I suspect. It was interesting, when I was on the other end of the line, how I was never given a call back number, only provided first names, and never able to reach anyone via a telephone number. Classic boiler room sales tactics were used. Investigative reporters would do well to listen in on some of those calls. Even better yet now, but I guess you could just cookie-cutter it for individual advisers since you are “low-balling” your fees in comparison to the 401k adviser fees you TRY to charge. Both you, me, and countless other advisers around the country all know it’s the 401k advisers that you shoot for the jugular.

And now here you go again. You two have definitely bitten off more than you can chew. So you did not make it in the adviser business and now you want to feed off that very same business. An odd dichotomy in and of itself. Enough is enough!

So how about answering Mr. Freeman and the Tide Will Come In’s questions? Oh, that’s right, a blog post is coming. Well you may want to work on some damage control in the interim as well (tidy up those boiler room sales tactics for one), because word can spread pretty quickly. And please don’t get me fired up or we may just have to touch on that Target Date Analytics thingy.

I believe the first poster had it wrong. As Mr. Buffett once stated: ““Only when the TIDE GOES OUT do you discover who’s been swimming naked”

P.S. Mr. Alfred, who is Calvin? Do you care to elaborate? I’m sure he’s not the only one who is disturbed by what goes on “behind the curtain”.

Addressing people who will not identify themselves is sort of like doing business with terrorists. But here goes nothing.

On January 29, 2009 when we launched BrightScope.com, there were 800 plans rated. We would have loved to rate more. But the Dept. of Labor had not yet built a process to deliver the needed data to us. Over the course of a year, we broke through the logjam by investing millions of dollars and countless hours of time. Now there are 50,000+ plans rated covering over 90% of all assets. The Dept. of Labor recently disclosed that the process they built to deliver the data cost upwards of $100k. If it were not for the pressure we put on the system, the marketplace still wouldn’t have a comprehensive view in to fund distribution, fees, quality, etc… across plans. We are now going to be delivering some data to the Dept. of Labor on fees because it will helpful for them in doing their jobs. In this case, BrightScope opened up a very valuable dataset that anyone can now access on the web.

On April 26, 2011, we launched Advisor Pages with 450,000 limited profiles. Just as before, the SEC and FINRA do not have a process built to deal with our requests for data. Even worse, FINRA is actively trying to prevent this data from being made truly public. So, much of the data is not complete yet. We’ve had numerous requests over the last couple of days from FINRA registered brokers to have their profiles populated. We are working as quickly as we can to do that. The fact that my brother’s profile and mine do not contain fully detailed information yet is symptomatic of a larger issue which has nothing to do with these aggressive assaults on our integrity. It’s a simple data issue. Fortunately, we’re very skilled in this area and you can bet that the quality of the data will be 2-3x better within a very short period.

Longer term, I don’t see how FINRA’s position on this is tenable. They are using their position to obfuscate data that when viewed by an individual investor could save them from hiring somebody like Bambi Holzer: http://www.brightscope.com/financial-planning/advisor/333406/Bambi-Iris-Holzer/ If anything is criminal, this is it. President Obama has made it very clear that any public data that could be used to identify potential bad actors, needs to be liberated. FINRA can’t sit on the wrong side of history forever. Particularly now that they are charging for public access to some of the SEC’s data. Crazy, I know. But this is what we’re up against.

Thanks for your patience.

Mike: Thanks for taking the time to respond to our anonymous commenters, and thanks to those commenters for raising some questions that many readers are probably wondering about.

This overview sheds some useful light on the FINRA side of the issue, and I hope all of the remaining open questions are cleared up in the post you’re working on. Please do post a link when it’s published.

Nevin

Out of interest, I entered my own name to see what the Brightscope search provided.

I serve primarily as CCO and an investment adviser with a firm which has $160m AUM. I was nott listed as an advisor with this firm.

I also serve as CCO of a few affiliated RIA firms, which have very minimal AUM in comparison. My personal listing only indicated that I was associated with one of these firms, which had AUM just over $1m.

Query whether the inaccuracies in this database, which are clearly detrimental to a consumer who might seek out information about me, could lead to potential liability.

I question the benefits of this service. There is no indication of my educational background, certifications obtained, investment strategies utilized, etc., etc.

So much more can be found out concerning a firm by examining its Form ADV Part 2A disclosures, and about a particular advisor by examining its Part 2B disclosures. Hopefully FINRA will soon adopt similar disclosure regimes for BDs and their registered representatives. It would then be nice for the insurance companies and agents to follow suit, but that’s probably just wishful thinking.

Ron,

I appreciate and understand your concern. My team of nearly 40 people is working 24/7 to populate all of the data fields. In very short order, every single valuable data point from a U-4 or ADV filing will be reflected on each Advisor Page. We will even be capturing valuable nuggets off of the narrative section of the ADV. Nobody else in the industry has the capability to do this work right now besides BrightScope. I can’t stress enough just how challenging of a problem this is to solve. But it will be solved and it won’t take as long as you think.

I guess the real question is what will be left to complain about once every data point matches what you could find on the SEC or FINRA websites. I’m looking forward to those critiques as I imagine they will be significantly more interesting than the ones we are hearing now.

Mike

To Mr Ron Rhoades and the readers of RiaBiz: Mr. Alfred is not telling you everything. Brightscope is not the only firm doing this; http://www.wealthvisor.com/ has a this service. However, WealthVisor is superior with regards to business ethics and professional standards. WealthVisor will allow you to opt-out and will honor your Trademarks. Additionally, WeathVisor is not out there claiming this is revolutionary rocket science; they are forthright in acknowledging that the regulators do a data dump and they try to add value with social networking and ratings.

Mr Wallace (CPA),

I find it humorous and even a bit ironic that the two characteristics that you cite for the superiority of an alternative advisor listing service have absolutely nothing to do with the individual investor. Anybody who enters this business with the sole purpose of defending the status quo and/or not rocking the boat will never build a true standard that resonates all the way down to the individual investor. And in that case, they will not actually be competing on the same playing field with BrightScope.

Mike

Mike,

It is glad to here that improvements are being made. I understand that the first iteration of any project always has its bugs.

It is also good to see that some information from Form ADV Parts 2A and/or 2B will be made available.

I’ve always been one for transparency. Though consumers don’t usually read all of the information they should, nor do they often know what facts to key on, nor do they often understand much of what they read, disclosures and transparency are generally worthwhile, nonetheless.

I hope that your effort, and that of other firms, will lead to consumers making better decisions. It seems like a monumental challenge to gather up relevant information, make it available in an easy-to-comparison format (without diluting the substance of the information), and then keeping it all current. Until such time as the SEC, FINRA, and state insurance commissioners all get their act together – and form one centralized database – services like this could – if properly implemented – be a good thing for consumers.

Thanks again. Ron

You didn’t address any of my questions, but hey that’s to be expected as I’m a “terrorist”.

So FINRA and the SEC are trying to keep adviser information private? That’s funny, rather hilarious, as the new ADV Part 2 require advisers and firms to provide direct links to where more firm and adviser information can be gleaned. And exactly why should FINRA and SEC provide you and your company with direct data feeds to populate your strong arm, inaccurate databases? So the taxpayer monies and firm and adviser fees that allow the entities involved to exist and operate should be used to provide your firm with direct data so that you can then profit on that data by way of unsavory business dealings? It’s called work and if you want to use that data for personal gain, why exactly should they provide it directly to you? I don’t know, but the word EGO and GREED keep popping into my head.

Here are some links where you and the average consumer can go pull ACCURATE and UP TO DATE adviser, firm, and 401k data free of charge:

SEC investment advisers and firms: http://www.adviserinfo.sec.gov/

FINRA Broker Check: http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/

DOL Form 5500 data: http://www.efast.dol.gov/portal/app/disseminate?execution=e1s1 (much more up to date and accurate than your database I might add)

Like your adviser data, your 401k data is dated and in a lot of circumstances incorrect. You strong arm 401k advisers and even plan sponsors. I know this firsthand. Your 401k pricing varies according to the “size of the fish” on the line. And now your coming after advisers. Well good luck! And don’t forget, we’re all waiting for that half-baked blog post to come with baited breath.

Your company is a joke and the “industry” as a whole (advisers, firms, media, regulatory authorities, etc…) would do well to steer clear of you two clowns.

Anonymous Sea Tide,

If there was anything substantive or worth responding to in this most recent comment, I would certainly do so.

Here is the blogpost you’ve been waiting for: http://www.brightscope.com/blog/2011/05/03/brightscope-advisor-pages-launch/

Best,
Mike

Well Said Mr. Tide Go Out: Given BrightScope fails to update data without a fee and given BrighScope fails to honor legitimate trademarks, I recommend we file complaints with the FTC: http://www.complaintsboard.com

Further, I recommend we contact the SEC & FINRA and register a complaint regarding the abuse of our data by BrightScope for ill be gotten gains. Contact your FINRA local district for best results.

Mr Alfred, this is not personal. I have a perfect compliance record and I want my data out there; but I want it from the source and I do not want to be affiliated with you or BrightScope in anyway whatsoever.

Tide Goes Out,

We welcome a good discussion on this site. We don’t love anonymous comments and for the most part, to stay consistent, we try to keep them out of our articles (especially potshots). We tolerate them here to err on the side of getting more views

It starts to cross the line away from a quality discussion when one side uses a contemptuous tone. It’s definitely not great when one side is calling the other side names. I think it undermines the dignity of the discourse and the credibility of your arguments.

Brooke

I don’t think I’m the only one taking pot shots here. I was labeled a “terrorist” by Mr. Alfred above. Does the same warning apply to him?

I am getting a bit animated here because he refuses to answer, pretty much, ANY of my questions. It’s about time some of the issues surrounding their company see the light. I apologize if I offended anyone.

To your concerns, if you do not “love” anonymous comments, you should not allow them to take place here. As of my writing, a “real name” is encouraged, not required. I sincerely appreciate the fact that you have allowed me to voice some of concerns here on this forum.

As to Ryan Alfred’s (Michael Alfred’s brother’s) blog post, it’s exactly as I thought it would be. It is a long drawn out piece that continues to befuddle and obfuscate the real issues at hand. I don’t have enough time to respond to everything posted there, but here are a few points that immediately stood out to me:

1. You mention all of the publications that provided a positive review based on your press release and then go on to mention Investment News in passing and citing most of their reporting as inaccurate. Why no mention of RIABiz? Could it be because of this very discussion? I just wish that reporters would ask more questions and turn over more rocks before garnering so much attention on a company before ultimately knowing what the true purpose of that organization is. In my view, Brightscope purports to be for the consumer, but if you are someone on the money end of the equation, that is not the feeling you come away with after hanging up the phone with a Brightscope company representative. That is of course, IF your able to speak with someone on a phone.

2. On data quality, your taking into question Investment News assessment that 84% of advisers responding to their polls were incorrect and that the SEC had provided you different data or calculates AUM differently. That’s absurd. I’m sure they placed a poll on their site and that is where and how they arrived at these numbers. So 84% of advisers that took the poll are lying? I venture to say that you have pulled your data from other RIA databases already out there as it matches some of those databases information much more closely.

3. On data timeliness, the data is all there in “real time” at the sites I listed above. Like I stated earlier, that it is not formatted in a way that allows you to quickly exploit the data for monetary gains is not FINRA’s, the SEC’s, or the DOL’s problem, it’s your problem. Once again, that is what we call “WORK” here in America. There is no free lunch. Advisers and firms are required to update their firm and individual data upon certain triggering events, what procedures do you have in place to assure that you pull that data and that what is posted is accurate? Most of the 2010 end of year data is already old news. With new ADV Part 2 filing requirements due by 3/31/2011, most of this data would have been imprecise just a few months later. This is not the first time you have experienced these complaints as your 401(k) data suffers from even larger lag times.

5. On your business model, how did you arrive at this 90% accuracy number? I know of several firms and individuals in your database whose information is grossly incorrect. I realize at this point that I will not get an answer to this question as I did not receive an answer to ANY of my questions in my above posts. You go on to say that any lapses between your data and publicly available data are a FINRA/SEC and adviser issue, not a Brightscope issue. We can’t always be right. No one is perfect. Your firm would do well to realize that we can all make mistakes.

On another note, I wonder about the 40 employee number you mention above Mr. Alfred. Is there an office address we can visit, a phone number we can call? I venture to say that these numbers are somewhat inflated. Based on the basic business calculations of a 40 person workforce and the amount of money involved to sustain that workforce, how can you be profitable as a company? Based on the numbers (for 401k services Brightscope provides to advisers, plan sponsors, and now individual advisers and firms) that I have been privy to, I don’t understand how you are able to sustain your workforce, pay your rent, etc… One needs to have only an elementary understanding of math to realize that something is not right here. Venture capital can only allow you to run so far.

I believe I have spoken my piece. I will take your advice CPA Wallace and voice my complaints with the FTC, FINRA, and SEC going forward.

Thank you again RIABiz for allowing my opinion to be heard.

Anonymous Sea Tide,

Your meandering speculations are interesting but almost entirely incorrect. If you come out of the shadows and reveal your true identity, I am happy to speak with you on the phone about your concerns.

To be clear, I never called you a terrorist. I said that trying to respond to anonymous comments lobbed like grenades out of the bushes is sort of like trying to do business with terrorists. Your inability to recognize the distinction speaks volumes.

You and others, on the other hand, have directly attacked my integrity and called me and my brother “evil”, “criminal”, and other inflammatory and derogatory descriptors.

Again, when you are ready to come out of hiding, let me know and we can talk. If you’re not really interested in talking, then I’m not sure what you’re hoping to get out of the “discussion” happening on this message board.

Best,
Mike

I believe my comments, questions, and concerns speak for themselves. That you, Mr. Alfred, have chosen not to address any of them speaks volumes. As I read back through the above discussion I continue to find comments that are cause for more concern:

1. My numbers were off as to the amount of pay required to keep your operation afloat. I now need to multiply that by two and run the numbers for an 80 person workforce as you state that you have your employees working “24/7”.

2. You mention above that the DOL has spent “upwards of $100K” in preparing this 401k data for YOUR company. Now that is SERIOUS cause for concern in my book. I believe it’s 1) grandiose to believe that they did this just for your firm, and 2) shocking if this statement is true, particularly so as a tax paying citizen. I highly doubt this is the case as the EFAST and now EFAST2 systems have been in place for some time and improvements have been taking place and scheduled far before Brightscope became a company. There are far LARGER companies than your entity that appear on the APPROVED vendor and software list (http://www.efast.dol.gov/software/software.html) that have been clamoring for changes, once again, far before Brightscope became a company. And now, if your statements are correct or to be taken at face value, you are trying to strong arm the SEC and FINRA in to doing the same? God help us. I’m skeptical that they would turn this data over to you without doing more due diligence on your firm. I tried to do so with my questions above, but I had little to no success. Deflection and circumvention will not be an option should the SEC or FINRA come calling.

To your statements that my “meandering speculations” do not deserve a response, that is on you and your firm. I have no reason to come to a public forum and just make things up or waste my time. I am speaking from firsthand knowledge and experience. Sure I could call you (Or could I? You would actually provide a company phone number? Gasp!) and have a heated discussion with you on the phone. But, I believe a public forum, such as this one, is a much better place to discuss these matters, so that I and the Adviser community can have your answers on record.

I have a strong feeling we will never get those answers on record, but I also have a strong feeling that a few years hence, your firm will no longer be a concern for the Adviser community.

Mr. Anonymous Sea Tide,

1. BrightScope is on track to do more than $10M in new bookings for 2011. We need to hire a lot more employees to meet customer demands. It’s kind of odd that our growth and financial success is so dismaying to you. In a tough economic environment, it’s probably healthier to root for the success of young American enterprises, not root against them. We don’t outsource a single job to an overseas locale.

2. At 1pm on the afternoon of April 6th, Ryan Alfred and I met with 7 officials from the Dept. of Labor. The $100k figure was stated directly to us by one of those individuals in attendance.

Again, your speculations are interesting, but ultimately incorrect and irrelevant. BrightScope will continue to defy your negativity.

Mike

BrightScope deserves credit for securing venture capital and creating jobs in America. Mike, just a point of clarification, and not to be negative; but can you define “bookings?” Are you saying that at your current revenue run rate you will do $10 million this year? If so that is great, but I wouldn’t use the term “bookings” any longer. Also to anyone who has every traded bonds or worked on Wall Street $10M is $10,000. “M” being the Roman numeral for $1,000; there $10MM is $10,000,000. I realize VCs created this bad habit of using M for Million but it is better to spell it out so your audience will not think you are misleading them on a technicality. Thanks!

Thanks Wallace. I’m glad there are CPAs like you to handle the technicalities so that I can stay focused on growing the business, creating jobs, and helping our clients achieve great results. I’m fairly certain our investment bankers will make their best attempt to keep me from saying anything too stupid when they brief me for a future roadshow. That’s when it will really count.

1. $10MM in new bookings- sounds like a product pusher if I ever heard one. What exactly is a “booking”? If we could take your word at face value, I might believe you.

2. Sad indeed. Our taxpayer funds go directly into spending $100K to provide information to an entity with unsavory business practices.

As I stated once before, I’ll leave it with a quote from Mr. Buffett: “Only when the TIDE GOES OUT do you discover who’s been swimming naked”

Yawn

Our continued investigation of BScope business practices has turned up the following which we have posted on our blog:

The Brightscope owners Mike Alfred and his brother Ryan, were fined for an inappropriate sale of a variable annuity in a 529 plan. They were employed by AXA Advisors then. It appears, quoting the report, that variable annuities sold by the Alfred brothers were deemed: “...unsuitable, irresponsible, not reasonably needed and lacking a strategy for risk management.” They were fined $135,000.00.

Please see the FINRA public information reports. Contact us for further information.

It is very concerning that two people who so aggressively preach disclosure and transparency in all other, while questioning other integrity, fail the same test themselves. But predictable.

Is it appropriate for licensed professionals with this background to be on national media making any sorts of claims and pronouncements about the industry and markets — let alone other advisors or plan sponsors or plans? We think not.

It seems odd that an industry journalist or editor would not have checked on this background before this and brought it to the attention of the professional community. Why have they not been subject to the same scrutiny they loudly demand for others?

The industry and community should hold these two men accountable for their actions.

Good work Rich & Co. Through the Freedom of Information Act I am getting BrightScopes communication with The Department of Labor and the SEC. I hope to find that Mike Alfred’s claims are exaggerated. I think the Obama administration should be alerted to Alfred’s past. Mike seems to be ingratiating himself with the Administration.

Ours is a team effort. In the retirement community we have been asking hard questions of BScope for over a year. Questions they have been unable, and refuse, to answer. As BScope has demonstrated, their standard responses to letimate professional questions are personalized attacks and very odd off-topic statements to deflect attention from the serious questions being asked.

This tactic works. Especially with the media.

The advisory side of the business is now being subjected to their, what we have come to believe are fundamentally questionable, business practices and sales campaigns and PR blitz’. They are very effective marketers and sales people. We give them that.

BScope data is uniformly inaccurate and the advisors and retirement plans being misrepresented are then forced to give BScope something to correct the misinformation – or else the misinformation contiues to be aggressively promoted. Give the Ryan brothers good data — or else.

Be careful in dealing with them. They have been digitally staking us and our clients and one of their co-owners sent a threatening email. They are tough, aggressive and have their own rules of engagement.

As is true for all companies and individuals aggressively promting themselves, the industry media, editors and producers are giving them a pass and, as can be seen, not doing even basic fact-checking or background checks.

This is predictable, however. Even in our industry — The facts rarely get in the way of a good story.

The violation in the Ryan brother’s recent past is a very significant, and somewhat shocking, finding in the retirement business. Perhaps, less so in the advisory world. When we made various publications aware of this – they ignored it and made excuses for the Ryan brothers! In retirement, you cannot do that.

There is a lot more on BScope which we will share as time allows. It is not a pretty story. Stay tuned.

We made the administrative call to leave somewhat questionable comments [from all angles] up on this page in order to get more perspectives on this new offering from BrightScope. It worked, but it came at the cost of some sarcasm and some statements that are questionable in their accuracy.

Going forward, we’re going to be slightly more rigid about asking commenters to rephrase or remove insensitive remarks. I hope that everyone who took the time to share here will do so again, and will keep this in mind for the good of our reader community.

Thanks,
Nevin

The balance between open and free exchange of facts and views and censorship is always a challenge in open conversations about controversial matters.

However, the financial services community is a highly professional, regulated and trained group so rarely do conversations need editing. More important is transparency, learning the facts and group problem-solving. Sometimes conversations become arguments that make moderators uncomfortable. That understandable but some topics and discovery processes are going to be uncomfortable — but necessary.

This continuing topic is a good example. There will be much more to say and learn on BScope’s business practices.

Here are some new blog posts on BScope principal’s past troubles and the media’s reluctance to address them. There are some good comments submitted as well:

- “Retirement’s Frankenstein: BrightScope is a Symptom – Not the Problem” – http://wp.me/pXvvI-7l – “Why Is Industry Press Looking Away on BrightScope Principal’s Past FINRA Violations?” — http://wp.me/pXvvI-6o

Our Conclusion: The main lesson is that the retirement community cannot depend on the current industry media for problem-solving, critcal reporting, or concern for ethical problems. Serving advertisers, PR campaigns and the status quo are their priorities. This is understandable and predicatable. However, we in the community must engage in self-regulation and doing our own research.

Attached and below is the complaint I sent to FINRA. I also spoke to them and they were unaware of your site and will look into the violation of their terms and conditions.

Brightscope.com is stealing information from BrokerCheck and posting it onto their site. It can be dated information and is sometimes inaccurate which does not help investors. Additionally, they are asking reps to pay them to clean their record which is blackmail and violates the intent of BrokerCheck by having inaccurate information for investors to read. For example, they are also taking information from the IARD, with the SEC, and reporting AUM for the RIA on each affiliated IAR which is of course not accurate since that makes it look like the RIA has more AUM than is true.

I formally ask that you send a Cease and Desist letter to have them remove the BrokerCheck information since they are in violation of the terms and conditions of BrokerCheck, specifically section 4C which says the information is only for NON-COMMERCIAL use. The information is clearly being used for commercial use since they are charging and NOT affiliated with any governmental regulatory body.

There are other similar sites and I implore you to look for them and make it known that these sites are in violation. I also ask that you notify the SEC that their information is also being stolen in reference to RIA’s.

We the representatives and the firms give this information to FINRA and if firms like this are using OUR information without our consent there will be legal consequences for FINRA not enforcing their own terms and conditions.

FINRA should not only protect investors, but should protect the firms and representatives that fund the FINRA organization.

I asked the firm to remove my information and they refused saying it is public information. Clearly, the firm doesn’t understand Internet laws or what terms and conditions are.

Also, very ironic that Mr. Alfred’s own U4 isn’t clean and not active…

Public information is different than ownership of information. What they are doing is similar to repackaging PUBLIC copyrighted or trademarked material. Ask napster how that worked out for them.

Maintaining accurate data is paramount to BrightScope’s mission of bringing transparency to the retirement plan and wealth management marketplaces. Drawing from a variety of sources, BrightScope periodically updates the profiles to reflect the most current information available, and will perform a priority update, free of charge, if notified of any information that does not match the information on an advisor’s most recent public filing. Because individual AUM is not available on the public filings, where an advisor hasn’t claimed his/her profile, BrightScope will list the AUM at the firm level, and clearly label the figure “Firm AUM” to reflect what is listed on the firm’s filing. Even advisors who claim their profile are not permitted to change any of the core data that is available on their individual public filings (such as employment history, licenses, registrations, or disclosures); they are only permitted to supplement that information to present a more complete picture of their business. Thank you for your feedback and your patience as we continually work to refine and improve BrightScope Advisor Pages to maximize the value that we deliver to both investors and advisors.

Oscar,

Can you respond to the apparent violation of FINRA’s terms and conditions?

Interesting how BS’s counsel mentions patience when:

- The Alfred brothers didn’t have enough patience to make sure only the best and most honest information was promoted on their sites or before publishing and attacking every advisors reputation in teh country

- Would he be so “patient” if his professional reputation was under attack online

Is counseling patience something he would do if his clients reputations were under attack?

Hi, I am a dentist. You have published my offices profit sharing plan information and my Tax ID
number. This information doesn’t help anyone but it hurts me. Each time a patient googles me they get this info. If you can’t take my information down I have been advised to stop my profit sharing plan that my employees really count on and do a SEP just for me. Please take me off your site and off of the internet. Please? It has caused my practice a lot of problems. Thank You, John Covert DDS

It would be helpful to the advisor community if this case were informed of you experience with BScope. No doubt other plan sponsors feel the same risk.

I would be happy to share this information with the advisor community, just because it is legal to do something doesn’t mean you should. Since legislators rarely read the legislation they pass and votes are often on the same day that the proposed multi volume legislation is published ,often no one besides the lobbyists who wrote the bill even knows it’s content. There are many unintended consequences to laws that are enacted and I think this is one of them.
What would you like me to do??

Hey John, Thanks for the comments. I write for RIABiz.com and as you know we write a great deal about BrightScope, the company which publishes this data on its website. I know the BrightScope folks read our website but since this article was published more than a year ago, I’m not sure they’ll be checking on the comments section. If you’d like I can pass on your concerns to the founders and have them get in touch with you – the Alfred brothers.

As you said, it is public information but I’m curious in terms of how this information has had a negative impact on your business. Are you worried about identify theft with the tax ID number? To be honest, if I googled my dentist and saw his office has a profit-sharing plan, I’d be pretty impressed and that would make me think highly of the way he runs the office. I’d be happy to know that his office is providing solid benefits to recruit a talented staff. It might even make me not want to run fleeing out the doors as soon as I sit in that chair (ok. nothing will make me feel truly comfortable in that chair). Anyway, putting my phobia of dental-work aside, just curious about why this information has had a negative impact on your business? Did you lose clients?

You’ve probably been on BrightScope’s website and tried to contact them, but as I said, I can reach out to them on your behalf if you’d like. I can’t say they’ll make any changes, but I know they will listen to your comments. Feel free to e-mail me directly if you prefer at: lisashidler@gmail.com or lisa@riabiz.com.

Is journalistic independence and professionalism served by a senior editor of a major industry publication helping one company with a customer service complaint?! Would the editors do this for complaints against other companies? Say Fidelity, Junxure, Schwab, etc.? If not, why BScope?

Dear Lisa,
I would love it if you could pass my concerns to the Alfred brothers. I have e-mailed almost every address on their website and have received no responses. I read their biographies, they seem like pretty amazing individuals, I have a feeling that exposing small profit sharing accounts is an unintended consequnce of their software but like I said, I have heard plenty about it from patients who have seen it. One has already commented that I must be making too much money etc. Sadly, we are a pretty low key “patient comes first” type of office , we are just frugal and I pay my staff a living wage and I am really happy to help them in their retirement planning. Having my tax ID number out there does concern me. I have a very interesting sister and sister in law who could cause plenty of mischief with information such as that. Who needs internet predators when you have relatives that would happily beat them to the punch?? My name is John Covert DDS and I would be most grateful if you could help me get that down. Also, my friend Keith Blalock DDS would appreciate his coming down also, as would my friends who are oral surgeons, but I cannot speak for them and name them here without thier permission. Thanks for your help! John Covert DDS

It would be very valuable, and generous on your part to simply report your experience. It is legal to publicly communicate many things but also may present legal jeopardy to either party.

You may also want to know that there is a group of advisor and retirement professionals who have found, and tried to publicize, serious concerns with BScope’s business practices. Predictably, BScope has cleverly deflected these as “personal attacks.” Mislabeling professional concerns as personal attacks is usually an effective tactic but a misrepresentation. For some reason, BScope in joined by most media is denial about their business practices. We have had many comments deleted by editors.

It was only with social media and no censorship that disclosure started to occur. It is not pretty.

I actually received a personal threat by a BScope investor by email. Also, the Alfred brothers were required to pay a substantial fine to a retirement client – and a report on this is publicly available.

Indeed, it is only in identifying the harmful consequences to individuals that laws and business practices can be improved. You should also consult an attorney. Complaints are one thing. A legal strategy gets attention.

To avoid editorial censorship, also send me your email to elmer.rich@richandco.com

Dear Mr. Rich,
I understand your point of view. However, I am grateful for any communication that Lisa Shidler can help open between me and the Alfreds since I have been unable to communicate with their company. I actually think if they filtered out the small profit shaing plans say less than 40 people and under 5 million dollars, that they could prevent almost all of these unintended exposure and make a lot of people very happy without spending much money and not change what they are trying to accomplish. Since I am not a member of the financial community I am unaware of their other business practices. Yes, I have already forwarded this to my attorney and he is showing it to one of his law partners that specializes in this sort of litagation, but I am always happy to settle things with out being involved in litagation. Usually if you can communicate with someone you can find some remedy, if not then you can purue a legal solution. Per your comment, I would be happy to report my experience if they don’t remove it but I have no idea who to report this sort of problem to. I am speaking with my congressman next week and I was going to ask him to help me because this is simply an invasion of privacy and I really worry about my tax ID and other information being disclosed as well as the potential for malpractice lawsuits once people believe that you have substantial assets.Not to mention the comments that I am hearing from patients. I may just change the name of my profit sharing plan and solve it that way. Sincerly, John Covert DDS

Dear Ms. Shidler and Mr Rich,
I just got an e-mail from bright scope. They have taken down my information and I really appreciate it. Thank you Lisa for contacting them for me , I know that it is not your job and I am grateful. I do think that they can avoid these problems in the future by casting a smaller net so to speak, by raising the minimum balance to 5 million or so and the numbers of plan participants to 25 or 30 of parofit sharing plans before they publish them. Thanks everyone.Now I can go back to taking care of people.
John Covert DDS

Elmer, I always find your comments insightful. But when the topic involves BrightScope, there’s no question your judgement is clouded. As you know, RIABiz is read mostly by advisors and I rarely get consumer e-mails. When I do, I try to make an attempt to respond especially if the person isn’t able to reach that company. Most advisors have their own contacts for the companies that you mentioned above, but I certainly respond to them as well when they write me. In many cases, when I get comments from advisors I do reach out to corporations about an advisor’s concerns and often times it results in a story. When I hear from consumers, it doesn’t result in a story as often. But I do find that consumers – who aren’t in the industry – are simply trying to get more research on a topic. I do my best to respond to them if I can. You may recall there was a client who was going to move his assets to an RIA (Fisher, I believe) and I encouraged him to e-mail me and I offered him some insight.

In this case, the insight I want to offer you John is that this information BrightScope is using is in fact available from public records and there are other companies beside BrightScope that are publishing your information. As you noted, the company agreed to take it down.

However, John you should note that even though BrightScope took the information down, it can still be found in other sites such as findthebest, graypools and minyanville. In addition, the relatives could also find it directly on the DOL site as well.

Now if only Congress could take a page out of this reasoned exchange.

Brooke

Good intentions are one thing. I would suggest journalistic independence is worth more to the community than help with customer complaints.

Our comments on BScope are facts based only. Since our comments are public, and are typically attacked publicly, they have to be backed up with documentation and facts that are public record. Claims that appropriate professional questions, based on facts, are “personal” is just a rhetorical tactic to deflect serious discussion. This tactic is used so often because it works.

Indeed, public information – and errors in that information are spread widely. So addressing each site one at a time seems the only recourse.

Good intentions are one thing. I would suggest journalistic independence is worth more to the community than help with customer complaints.

Our comments on BScope are facts based only. Since our comments are public, and are typically attacked publicly, they have to be backed up with documentation and facts that are public record. Claims that appropriate professional questions, based on facts, are “personal” is just a rhetorical tactic to deflect serious discussion. This tactic is used so often because it works.

We welcome corrections to fact or new information. We can only comment on information we possess.

Indeed, public information – and errors in that information are spread widely. So addressing each site one at a time seems the only recourse.

Let us also mention that individual cases are typically symptoms of more systemic problems. So a firm can take down one page but that doesn’t start to problem-solve on the factors that led to one firm crying foul.

It does seem appropriate for industry journalists to look behind a single complaint and do some fact-checking on whether a single case may be a sign of wider issues. That helps the community and seems one very valuable and historical role of professional journalists.

Elmer, I must say that I think a person can maintain journalistic independence while responding to a reader. And, I don’t want to get into all of the nitty-gritty about how we report on a story – (it’s kind of like sausage-making – most people don’t really want to hear about it). But I will tell you that anytime I get a comment such as John’s I am thinking about potential stories. That doesn’t mean it will result in a story, but certainly I write words for a living and I’m always eager to craft another story.

For instance, as I said above, I was curious about my own dentist and their profit-sharing plan. Indeed, I looked them up and it’s interesting to me because they’re listed on some sites, but not on others. BrightScope doesn’t list them, but some of the other sites I mentioned above do list them. This is a one-person plan.

I agree there very well may be a story here, and I’m always open to a story. Just because we provide insight to a reader doesn’t take away our “independence” and I believe that is clear.

As always, feel free to e-mail me directly as well if you have any story ideas. Thanks!

It’s pretty simple. The issue includes professionalism, truth, business practices and transparency.

The community is working to navigate and integrate some brand new factors: insti-individual retirement accounts, the growing dominance of retirement assets (people’s life savings) as the main asset basis for the business, radical transparency/instant information, new money making schemes, the fiduciary responsibility spread more widely, more regulatory and legal jeopardy, etc.

We are talking about people’s life savings now – so all this is very serious for investors, advisors and the society overall. So we have information gathered for protection of life savings – combined with opportunistic business models – not concerned with protecting people’s life savings. Lot’s of competing interests.

However, bottom line — losses from one’s life savings are generally never made back. So the advisor’s role is now a critical one. All of us now contribute to the critical role of protecting people’s life savings.

How we do that, will “take a village.” But we can ask, does online publishing of public information – at a specific site — help protect people’s life savings? That’s aplace to start.

Generally, individual experiences are the best guide. If the dentist has a problem – something deeper is at work. Following the granular, detailed experiences of individual investors, advisors, etc is where the real story lies. Press releases and stories from the companies are fine but mainly sales focused and les reliable indicators of what’s happening in the industry and markets.

But it’s work and takes the real skills of journalism, digging, thinking, questioning, digging some more etc. Hard work.

What’s at stake – have to say when I see these numbers it really floors me thinking of how the heck is the industry going to manage this? Ideas welcome.

“Investable retirement assets of U.S. households headed by individuals over the age of 55 will hit $22 trillion by 2020. That’s nearly double what it was in 2010, according to research from LIMRA, an industry-funded research group.”

For scale: Fidelity handles a little over $1T. Chances are the rate of growth is accelerating. This is only 7 years away!! I need a drink or 4!

What’s at stake – have to say when I see these numbers it really floors me thinking of how the heck is the industry going to manage this? Ideas welcome.

“Investable retirement assets of U.S. households headed by individuals over the age of 55 will hit $22 trillion by 2020. That’s nearly double what it was in 2010, according to research from LIMRA, an industry-funded research group.”

For scale: Fidelity handles a little over $1T. Chances are the rate of growth is accelerating. This is only 7 years away!! I need a drink or 4 — and I don’t drink!

Dear Mr. Rich,

Lisa- Thanks again for your kindness and for telling me about the other sites. These don’t come up when my name was googled like Bright Scope did, it was on the same page as my office web site which was disconcerting. I realize that if someone really wants to be a pain that they can find a plethora of information on the internet, I am just glad that it is no longer right there when someone is looking for our address or phone number or website. Thats all that I really wanted. I just hope that it doesn’t get posted again next year when we file our 5500. Thank you again and
yes I too wish our congress could find some civility and common ground to solve things, there are probably more things that they agree on that they could work on first and establish some sort of trust and understanding then work on some more contentious topics. Sadly we have too many extremists from both sides and fewer and fewer consensus builders. It all goes back to education, we have a Senator from Kentucky who thinks we can do without the Fed, amazing, plus we have an entire network that is foriegn owned bent on pitting us all against each other which is appaling at best. I wish that we could all participate more in the political process but I fear that is is broken and it will be a while until people decide they really want to correct things, when that happens common sense can prevail. Until then my wife and I try to think globally and act locally. Just my opinion for what it’s worth. John Covert

Mr Rich,
I too worry about retirement, the recent Bush administration made half of our life savings disappear it has finally after 5 years of investing returned to it’s former balance. Your industry needs to effectively influence congress to be responsible and come up with common sense regulation and watch speculative financial instruments like derivatives and some of the mortgage based assets that became so popular, you also need to separate banks from brokerages from insurance companies again, after 1929 we found out that was a bad idea then we did it again. First, you will have to address human behavior and greed. That will require huge paradigm shift. People who do not study history are destined to make the same mistakes. We also need to insure that no one can influence too much TV media, print media and radio. We used to have regulations to prevent mass manipulation but the FCC removed most of that while Powell was chairman. There is alot to be done but you have to calm down, not be so shrill, and begin with a more reasoned approach. Best Wishes, John Covert

When journalists act to further business concerns of a separate entity, it always raises questions of independence. There are strict boundaries between professional journalists and commercial enterprises. The simple principal being, if you are not formally engaged and paid to do something involving a commercial matter – it is out of bounds. For example if a journalist does this for one firm, why not others?

This is a matter of professional ethics not personal ethics.

We would propose we are experts on the matter of media, manipulation and financial services. In fact, research is consistent that you cannot force people to watch/buy things they don’t already demand. What you see on the media is literally what people are willing to pay time, money and attention to get from the media. We get the media and stories we want.

That said, lying is way out of bounds but lies work — a weakness of our brains. Fear is, biologically, the best motivator and most fear headlines are just false. A good example, is Madoff. Madoff was bullied into doctoring his returns by one of his biggest clients. Other clients then flocked to get the same “deal” and be told the same, false, story. Madoff actually did not make up his scam — one of his biggest and richest clients did.

The gentleman ended up found dead at the bottom of his pool! He was a real crook.

In every transaction and communications – there is a “pitcher” and a “catcher.” Blaming one side is inaccurate – but an easy default. We are agnostic on politics.

Elmer, my business is concluded here, very nice people took my personal information down and a very nice journalist helped me. That doesn’t make her a bad journalist, or some sort of conspirator, it simply makes her a good human being. I think that you should consider going to the humane society and adopting a nice dog or cat and spending some quality time with your new pet. You seem very high strung and I think you could use some relaxation, have you ever read Don Quixote? I don’t know you but you seem honestly concerned about some issues and I would bet that you are a very nice man, I hope that you can relax a little and lighten up. You will live a lot longer and be a better spouse and father and friend. Listen to some good music, love your family and friends, have a glass of good wine and be sure to turn off the Fox channel. I appreciate your passion but truly consider what I said. Awful unscrupulous business people will always be amongst us, but you only have one life and all of this negativity will certainly shorten it. When things happen that upset you and you can’t control, react by doing some volunteer work in your community, instead of ranting and raving, help habitat for humanity or be a Big Brother, or mentor a child. Find something you have a positive passion for and do it. Be nice to Lisa, you can tell that she is a thoughtful kind soul by what she writes and she would undoubtably help you also if you needed anything.

Peace, John

These guys have the mentality of cops. They teach there salespeople the same. I was called at one point and the guy literally started yelling at me because I said 100 a month was too expensive. Wouldn’t it be nice if one of the proud can do not wrong founders make a mistake…. Then we’ll see where the rubber meets the road.

The problem with Brightscope is that they publish incomplete information. I disclosed an incident when I was 17 years old, and arrested. All charges were later dropped & expunged from my record, but I felt it the right thing to do to disclose that. This information is available on the FINRA disclosures, but on Brightscope it only says that I had a criminal disclosure, with no qualifying information.

I complained to them several weeks ago, and received an email promising that they were updating their site, but so far, no changes. Prospects can’t tell from this incomplete information if I am another Bernie Madoff or just someone who did something stupid in his youth. This is misleading, and damaging to my reputation.