5 reasons why you shouldn’t use Yelp to find an advisor

Yelp is a very popular online site where consumers post ratings based on their personal experience of retail stores, restaurants and service providers. The simplicity of the site is that if you see that 200 people had been to a particular restaurant and each had a very good experience, there's a good chance that you will have a favorable experience, as well.

However, for five very good reasons, Yelp doesn't work well when you're selecting a financial services professional.

1. The search function fails to screen adequately: For instance, when "financial planner" was recently used as the search term in my own city, the results included two tax preparers, one bank, three insurance agents, three individuals who sell investments and only one certified financial planning professional. When the tax preparers were called, neither did financial planning; nor did the bank.

Chris Goodney | Bloomberg | Getty Images

The Yelp app on a mobile phone.

When the search term was changed to "certified financial planner," only one was listed, when, in fact, there are 10 in the area. Yelp failed to list the other nine.

Yelp has few or no restrictions as to which common terms can be used in the description of a business or service provider. That means a search for a financial planner, financial advisor or wealth manager could result in a listing that is quite far off the mark.

There are numerous cases where the individuals coming up in a search have no specific training for that search term at all. Therefore, if anyone is allowed to use any of these terms and you don't know what the criteria is for a search, what is the value of the search results?

When Yelp was contacted, Rachel Walker, a senior P.R. manager, responded: "Yelp's search algorithm is designed to return results on a range of key terms and other factors including location, so other searches will also return different results."

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2. It doesn't provide data needed to make a good decision: Consumers searching for a financial advisor need to know certain things, such as:

• Is the individual a Registered Investment Advisor, an insurance salesperson or does he or she merely sell investments (or all three)?
• Is the individual "certified" in some way, or does he or she have any meaningful training?
• What is his or her level of experience?
• Does he or she have any violations of governmental regulations?
• How is he or she compensated? Is it through commissions, fees or both?

Yelp's position on this is reflected in Walker's statement: "We think it's helpful to consumers to see information about both licensed and unlicensed businesses alike, but ultimately it's the regulatory authorities themselves who are in the best position to determine whether or not a business is properly licensed."

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3. Results are not always up to date or accurate: The search results that you'll see on Yelp are not always accurate. In the above search for a financial professional, Yelp listed an individual who had been dead for three years. In another case, a listed business had been closed for many months.

Walker went on to say: "The small business landscape is constantly in flux, so our user support and community marketing teams are always on the lookout for information that needs to be modified and we rely on our community to help us keep the site information correct."

4. The majority of reviewers have limited experience using a financial pro: When reviewers have limited experience using a financial advisor, the ratings may not be as accurate or useful as those of a restaurant rating, when reviewers have had hundreds (or even thousands) of restaurant experiences. With more experiences, they are in a better position to judge their future encounters with a similar business or professional.

As an example, a client told us that she was sold an annuity three years ago. She thought that the "advisor" who had recommended that annuity had done a great job for her and was very professional. When she came to our office for a comprehensive financial plan, she learned some things about the annuity that changed her opinion pretty quickly.

First, regarding that annuity, if she took out funds from it within the first 10 years, there would be a surrender charge. Second, she could not take out funds until she was 59½ or else she'd be subject to a 10 percent tax penalty. Third, the advisor could have provided her with an annuity with a shorter surrender policy but choose instead to sell the annuity that provided a higher commission.

The lady was livid at the salesman when she learned the true facts about the annuity and her opinion of her former "advisor" went from high to very low.

5. Using Yelp is more likely to direct you to a salesman: Less than 3 percent of financial advisors are Registered Investment Advisors and operate under the fiduciary standard 100 percent of the time. Fiduciary means that the client's interests are paramount in every case and there is no conflict of interest. This is the highest level of consumer protection among financial advisors.

The other 97 percent-plus are licensed to sell you products, which pay them commissions and which are subject to a conflict of interest between what is best for the advisor and what is best for the client.

The difference between the two legal protections is a very big deal. Most people are not clear as to which type of advisor provides the highest level of safeguards.

If the majority of the financial advisor reviews on Yelp are about salespeople, then those using Yelp in the selection of a financial professional may well be misled and could be directed to a salesperson as opposed to an objective advisor.

There is much to know about how to search for a financial advisor online. If you want a financial professional who is qualified, experienced and abides by a code of ethics, you should search for a certified financial planner who does not sell products such as annuities, investments or insurance.

To find such an advisor, you can Google "certified financial planner," plus " fee-only" and "[your city]." By using quotations, you will get a better search outcome. This would be a much better starting point compared to using consumer review websites such as Yelp. Another way to find such an advisor near you is to search the National Association of Personal Financial Advisors' website.

(Editor's note: This guest column originally appeared on Investopedia.)

— By Michael Chamberlain, manager at Chamberlain Financial Planning and Wealth Management.