Reviews Will be the Great Growth Equalizer

The near-ubiquitous adoption of online reviews goes beyond trust. Reviews are the great equalizer, the enemy of information asymmetry. For consumers, they provide an (ideally) unbiased solution for finding and vetting service providers. Even more, they provide a powerful tool to magnify influence and an outlet to punish or reward firms that otherwise might not have been concerned about the experience of an individual client. Savvy businesses, too, can benefit from the freer exchange of information among prospective clients. A 2011 study in the Harvard Business Review found that when Yelp penetrates a market, independent restaurants gain market share at the expense of chains. Their online reputations counteracted the brand names and large advertising budgets of more established firms.

Think reviews are just for ordering takeout or finding a new pair of running shoes? Most people won't apply for a job without checking a company's reputation on sites like Glassdoor. More than 70% of patients evaluate online reviews before selecting a healthcare provider. My wife and I personally read hundreds of reviews before finding the right nanny for our newborn (it doesn't get much more important than childcare).

For decades, SEC regulations made the wealth management industry an anomaly in which reviews were an afterthought. But the modernized marketing rule finally recognized that while testimonials – like any tool – could be abused, the benefits of more information for consumers outweighs the risks. For the first time, advisors can play an active role in generating public-facing client feedback.

The proliferation of advisor-matching and referral platforms is a testament to the appetite from consumers for solutions that assist in finding and vetting advisors, filling in a gap served by review marketplaces in other industries. In fact, people are significantly more likely to start their search for an adviser on Google than by asking a friend for a reference. And what pops up right at the top of a Google search? Local Google business profiles and their associated reviews. As these profiles begin to populate with client feedback, reviews will become the new referrals.

Yet, in my conversations with dozens of advisors, CMOs and CCOs over the last six months, they underestimate the impact client reviews will have on their profession. Two misconceptions stood out:

1. There is the idea that “we haven't needed them in the past, so we don't need them now.” This is akin to saying in the 1990s that you aren't going to build a website because Yellow Pages works just fine. The status quo only works if none of your competitors take advantage of the new opportunity.
2. Firms are going to “choose not to do reviews.” This is a false choice. Consumers have become accustomed to the power (and catharsis) that reviews provide; a determined client will find a way. The harder it is for them to leave that review, the more likely it is that only the passionate (read: angry) will do so. The real choice is between a come-what-may attitude or a proactive strategy to ensure your digital presence is representative of the true client experience.

Most of us remember a time before online reviews, but the next generation of clients come from a world in which trust for traditional advertising is almost non-existent, user-generated content is king and a strong digital presence is table stakes. As reviews become more commonplace in wealth management, firms that develop a proactive strategy to leverage client reviews as social proof will have the upper hand.

Andrew Johnson is the founder and CEO of Testimonial IQ, a reputation-management software platform for financial advisors. He can be reached at [email protected].

Read more articles by Andrew Johnson