Advisor registry Paladin stresses objective measures of advisor suitability. You might want to start scowling at your clients more and, in general, adopt a more aloof and imperious demeanor. That's the immediate implication of insights offered up by Paladin Registry, a firm that provides a free-of-charge advisor rating service to private investors.

Noting that allegedly crooked advisors like Bernard Madoff and Joseph Forte tend to "develop personal relationships with investors to create trust, gain control of assets, and generate referrals to other victims for their illegal products," Paladin founder Jack Waymire says "investors create substantial risk when they select advisors because they like them."

Screening process

Indeed Daniel Hawke, head of the SEC's Philadelphia office, recently said that "Forte engaged in lies and deception at the expense of innocent investors, many of whom considered themselves his friends and close acquaintances." The alleged fraudster "promised outrageous returns and, because of his relationships with investors, was able to lull them into trusting him with their funds," Hawke adds.

Says Waymire: "The source of investor vulnerability was their belief that people they liked would not take advantage of them for money. What they failed to realize was financial advisors want to be liked for three reasons. First, investors tend to trust people they like. Second, trust makes it easy for unethical advisors to sell bad products. And, third, investors are more tolerant of bad results when they like their advisors."

The serious point Waymire makes is that are more objective criteria on which to evaluate advisors than toothy grins, firm handshakes and promises of easy money.

Paladin claims to have solved that problem by giving investors "fast, easy and efficient" online access to "independent, objective documentation to view professional credentials and ratings that validate [advisors'] competency and integrity." Investors can use Paladin's search engines to find local advisors that the registry has pre-screened, and then initiate contact with advisors in a way that protects their privacy until they chose to identify themselves.

"We have replaced a dysfunctional process with an objective, structured service that substantially reduces investor risk of selecting the wrong advisor," says Waymire.

Paladin says its analysts screen advisors for competence, integrity, "and other characteristics that impact the quality and reliability of their services." Less than 10% of the financial professionals Paladin reviews make it into its advisor registry. Only professionals with three-, four-, and five-star ratings are listed. Far more than half of the advisors on the registry have advanced degrees or multiple professional certifications, and the vast majority acknowledge their fiduciary status.

Lincoln, Calif.-based Paladin Registry describes itself as "an independent, objective third party with no financial interest in the decisions of investors," and adds that "no financial services company or advisor has an equity stake in Paladin." -FWR

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