Investors’ Go-To Site: Finra's BrokerCheck

I liken browsing on the Internet to going to the stacks in a university library. You pull one book down, it leads you to another and then to another. Before you know it, there’s been a lot of input but (in my case) zero output.

As much as I try not to surrender to Web-based moseying, I will indulge from time to time. Something did give me pause this week and I thought I’d share the results of my digression here.

There was a quote on the New York Times DealBook blog Monday. “People are starting to use BrokerCheck the way they use TripAdvisor,” DealBook quoted Seth E. Lipner. Lipner is a professor of law at the Zicklin School of Business at Baruch College and he also represents investors in cases.

The post itself was about the heightened interest on the part of those regulated by Finra to pursue every possible means to remove negative information from their records. As investors increasingly rely on Finra’s BrokerCheck to vet advisors, the registered people hope to clean their files up before anybody sees anything.

While I have an interest in that, my real curiosity was in the characterization of BrokerCheck as a go-to site. How do investors even find BrokerCheck online? 

Who's Looking For A Broker Today?

Including “Broker” in the name of the database probably made sense when it was established in 1988. And, obviously, there are still brokerage businesses. But, do people really refer to individual financial advisors as “brokers” anymore, I wondered.

No, they don’t, as confirmed by this Google Trends chart, which plots the plummeting use of “stockbrokers” and derivative terms in the last 10 years. (As an aside, the search volume of financial advisor-related terms has remained relatively stable.)

Hmm, in addition to the traffic that heads directly there, BrokerCheck must get its traffic from links on other sites. I immediately hopped on over to the Majestic Site Explorer, a tool that has just been made free, and confirmed that, in fact, more than 9,000 mostly trustworthy sites (including plenty of .govs and .orgs) link to it. That’s a reflection of the benefits of being a 25-year-old entity sponsored by the well connected (online and offline) Finra. 

I then realized that I’d neglected to check Google Trends to see whether “Finra broker check” as a term had any search volume. Wow, as you can see, it does. Having peaked at 100 on Google’s scale in June 2011, search volume on the term in June 2013 was still a healthy 86 on Google’s scale. Drop Finra from the term and “broker check” searches are at about the same level.

At a time when the advisory business has evolved beyond the business practices of brokers, BrokerCheck as a term enjoys healthy brand awareness. It’s interesting to me that investors know to type in “broker check” when they’re researching someone who in all likelihood has branded himself or herself as something far different from a broker. And, a broker is probably not what they're looking for.

I’d make the argument that “broker check” and other search derivations are branded searches—this isn’t a generic search, investors have likely heard about BrokerCheck.

Since July 2010, search volume also has been up for “financial advisor check,” although interest has been spikier. But that’s not likely how an investor with no awareness of BrokerCheck would word the search, it would probably be a much longer search phrase. 

Google Trends also provides a geographic breakdown of where the BrokerCheck searches are originating from. I’m not sure what the insight is here. Are the searches in line with where the financial assets are concentrated? Are these searches an indicator of intent to initiate advisor relationships or to move money?

New York, Of Course, But In Nebraska Too

Most interesting on Google Trends is to view the change in regional search interest in the term over time. Specifically, you can see the map start to light up in 2008 in New York, California, Texas and Florida. Even though the 2013 search volume is off its 2011 peak, the searches are more widespread this year.

Ultimately, the primary takeaway here is that the name of Finra’s database search does not seem to penalize it in terms of traffic, thanks to high awareness which leads to successful searches, and also to its solid online support. A better name, social media presence and securing the domain would help even more investors directly find it.

Financial services continues to be the least trusted industry globally, according to the 2013 Edelman Trust Barometer. And, financial advisory is the least trusted among financial services sub-categories. Heightened use of the Web to research advisors is another indicator of post-2008 investor determination to take responsibility for who they entrust with decisions regarding their financial assets.

While there isn't a site comparable to BrokerCheck for checking on asset managers, we can assume that an equal amount of scrutiny is being applied to the product manufacturers whose mutual funds and exchange-traded funds (ETFs) advisors are recommending.