His vision for starting GWS was to deliver investment strategies and wealth management services typically available at the highest levels of wealth. Today, clients benefit from these sophisticated financial services targeted to meet their unique needs.
Everyone, including financial advisors, loves to be recognized as being among the best in their business. And in the financial advisory and wealth management industry, there is no shortage of Top Financial Advisors or Top Wealth Advisors lists. But how good are these lists at determining the best in the financial advisory business? More importantly, do these lists help consumers make better choices when it comes to selecting a financial planner or advisor?
Since Barron’s just published their Top 1,200 Financial Advisors list, we thought it would be a good time to try and answer that question. We decided to look at the criteria and methodology used by some of the most prestigious Top Advisor lists to see exactly how they decide who makes their cut.
In full disclosure, Glassman Wealth Services is recognized on all of these Top Advisor lists. We have to say, that we are pleased to be included on them, but, in truth, some may be more helpful than others in deciding which financial advisor is the right fit for you and your family. We’ll leave that up to you to decide.
BARRON’S TOP 1,200 FINANCIAL ADVISORS:
Barron’s writes that these advisors represent the cream of the crop from each of the 50 states and the District of Columbia. This year, for the first time in 10 years, they included Registered Investment Advisors (RIAs) in their ranking. Prior to this, only advisors who were affiliated with a brokerage firm were included.
I’m going to take a time out here, because it’s important to have a basic understanding of the difference in the type of advisors out there, what services they provide, and how they are paid to fully understand the value of these lists.
Typically, Registered Investment Advisors (RIAs) are not affiliated with a brokerage firm, meaning they are fiduciaries, do not earn commissions, nor do they recommend proprietary investment products. They provide financial advice, as well as manage their clients’ investments, and earn a fee for the assets they manage on behalf of their clients. Many of these are known as Fee-Only.
Conversely, advisors that affiliate with a brokerage firm can earn commissions from products they sell, including insurance and annuities. This can be confusing, as many firms call themselves independent, have their own names, but still have these conflicts of interest by earning commissions and have a tie to a brokerage firm. For now, I’ve included this CNBC video of my interview with Sharon Epperson about what a fiduciary is and why it’s an important consideration when selecting a financial advisor.
Getting back to the list…
Barron’s judges advisors based on:
- the volume of assets overseen by advisors and their teams
- revenue they generate for the firms
- the quality of the advisors’ practices
Barron’s won’t divulge exactly how they choose their top advisors, saying it’s a proprietary process. They do require advisors to complete a questionnaire with over 100 questions primarily focused on the size of the assets they manage, how much revenue they generate, and their compliance and regulatory record.
WASHINGTON’S PREMIER WEALTH ADVISORS
The Washington Business Journal relies on the National Association of Board Certified Advisory Practices’ (NABCAP) evaluation process. NABCAP is an unaffiliated, non-profit organization whose mission is to educate and inform the general public with reliable, unaffiliated, unbiased and completely objective information about financial advisory practices.
NABCAP takes pride in the fact that their top advisors are not selected by a “bigger is therefore better” bias. Rather than emphasizing assets under management or increasing revenues, they evaluate 20 categories within an advisor’s practice centered on investors’ financial needs and an advisory practice’s ability to meet those needs. Some of the 20 categories are:
- Client education and customer service
- Financial planning
- Risk management
FINANCIAL ADVISOR MAGAZINE: TOP FEE-ONLY ADVISORS
Like Barron’s, Financial Advisor magazine annually ranks its Top Fee-Only Advisors primarily on their assets under management. Other criteria include an advisory firm’s growth in assets, assets per client, growth in assets per client and the percentage change in the number of clients.
WASHINGTONIAN’S TOP FINANCIAL EXPERTS
Washingtonian takes a different approach than most. They survey hundreds of area financial professionals, such as tax accountants, estate planning attorneys, and financial planners asking them: Who would you trust with your own money? They also do their own research and those that receive the most recommendations make their list.
There are many more Top Financial Advisor and Top Wealth Manager Lists, and each region has their own version. But while these give advisors bragging rights, (and sell a lot of ads in the sponsoring publications) it’s up to you decide if these lists really help you to know if an advisor is the right fit for you and your family.
What Truly Qualifies a Top Financial Advisor Firm?
At Glassman Wealth Services, if we were to create our own “Top Financial Advisor” award, a few of the most important criteria would be:
- Fee-only: How can you really know if your advisor is working in your best interest if they can earn a commission on investments they recommend or insurance or annuity policies that they sell?
- Number of clients each advisor works with: Some financial advisors are great at marketing. If they are managing hundreds of clients and that number is growing, then no matter how good they are, there are simply not enough hours in a lifetime to provide personal service to their clients.
- Client communication: How often are they calling, meeting and communicating with their clients? In this case, silence is not golden.
- Performance: While most people would like to know the past performance of a potential financial advisor, most can’t provide this information for two significant reasons. First, the SEC forbids most forms of performance boasting. Second, many clients of financial advisors have unique portfolios, making it difficult to bunch results together for an accurate performance picture.