Broker Check

Practical Planning Tip: Thoughts on Financial Advisor Rankings

May 28, 2024

A question I often get from friends is the one I just received last week. It said the following: “My advisor told me he is one of the top ranked financial advisors. I congratulated him politely, but what does that mean exactly?”

 

So, Allow me to offer some thoughts on this question and on what it means to be a “top ranked advisor.” I’m sure some people may be offended by this, but that’s never stopped me!

 

First, I'm not sure where this advisor is ranked, but these are some things to know about top ranked advisor lists in general. 1) Many of these lists require the advisor to apply to be on the list. So many excellent advisors aren't on the list because they simply don't need or want the publicity. 2) Some lists require payment to be considered. If there is a list that only includes folks that pay for entry, the list is likely to leave off lots of top tier advisors who don’t feel the need to pay to be on a list 3) The ranking is primarily determined by how much money the advisor oversees, NOT on how good their advice is. This makes sense because the latter is much harder to assess, where it's easy to determine how much money an advisor manages. So these lists may be informative if you want to understand which advisors are the best in business development, but the lists are not helpful in determining which one's give the best advice since that’s very difficult to determine. 4) Unfortunately, these lists are not always a good determinant of which advisors are talented at business development either. The reason is many folks on the list will be part of larger groups that take credit for all of their group's assets, much of which they did not personally bring in. The assets of an entire group of advisors will be aggregated under one lucky advisor in order to earn a place on the list. Also, if a senior partner of a wealth management team is retiring, they will likely put a younger advisor on the list and give them credit for bringing in all the assets to gain publicity. Finally, some advisory groups are fed business by their firms and do-little business development at all. Therefore, these lists may not be a good indicator of business development, salesmanship, or marketing abilities, either.

 

Now back to the initial question: This person’s advisor likely applied and paid to be on a list for marketing purposes. The list demonstrates how much money their firm manages which your advisor may or may not have helped bring in. It doesn't measure his skillset as an advisor. In short, you did the right thing by congratulating him politely on being on a list and being confused at what the definition of "top advisor" actually means since it is still unclear what your advisor is considered to be the top in…

 

In upcoming videos, I will share some thoughts on criteria to find the best advisor for your family.


You can WATCH the full video here.