I recently read a blog by James Watkins, III, JD, CFP about the Barron’s list. So I went to the article and read it. It seems Barron’s selection process start with the financial advisor’s assets under management (AUM) and revenue generated for their firm. Those are both stats that are good for the advisor’s company but I don’t see how that results in any benefits for a client. Those two measurements are important to determine how profitable the advisor is to the company and how well they are at gathering assets and closing deals.
Barron’s also makes a point of saying that performance isn’t a factor in their selection criteria. However, referrals are another selection data point. Now, that is important because happy clients tend to refer others. However, Bernie Madoff got a lot of referrals as well and things didn’t turn out so well for his clients. So, number of referrals as a selection criterion for consumers doesn’t seems to be a hot screening method either.
I also feel compelled to note that most of the names on the list are registered representatives of large brokerage firms. That leads one to believe they are held to the “suitability” standard rather than the higher Fiduciary standard of care for Investment Advisors and CFPs.
Now, it is important to point out that many of the very best financial planners I have ever met were registered representatives and being successful in business is a good thing. Heck, I spent my first 20 years in financial planning as a “fee-based” registered representative before changing to fee-only.
I just think that if I was designing a way to find the “Best” financial advisors I would want to see if there was a way to find out how many of the advisor’s clients had happy, successful outcomes. How many clients received advice that helped them achieve their goals? And, if we could design a selection process based on these ideas, I bet a lot of the “Best” would also meet the criteria used in Barron’s selection process. And I also bet there would be a lot of small, boutique advisors and firms on that list that weren’t even on Barron’s radar.