Surprise! Surprise? For financial advisors, scoring placement in a “top advisor” list pays off. According to research from the University of Kentucky, being named a top advisor increases assets under management (AUM) and client accounts for individual advisors and their firms. These effects are magnified for smaller firms and newer advisors, the paper says. Here’s what financial advisors should know about the benefits of being “the best.”
How Ranking on Top Advisor Lists Impacts Advisors
A paper from two University of Kentucky researchers examines “third-party quality certification” in the financial advice marketplace. It specifically evaluates the ripple effects of appearing on Barron’s “Top 100 Financial Advisors” list and its impact on advisor firms and client behavior.
The authors took several approaches to identify a causal relationship between Barron’s top advisor placement and its effects. They worked to separate the granting of the award itself from the underlying quality of the advisor. Their research included using Securities and Exchange Commission (SEC) Form ADVs to identify firms that have an advisor who is named to Barron’s rankings in a particular year.
The researchers crunched the numbers by comparing, for example, an advisor who made it into the top 100 against one who missed the cutoff by a hair. Notable conclusions include these:
- After scoring a spot in the top 100 list, advisors increase AUM and client accounts.
- Advisors are less likely to commit professional misconduct after inclusion in the top 100.
- The “effect size” – or impact – of inclusion in the top 100 nearly doubles for advisors from smaller and less-known firms and for newer advisors.
Popular Advisor Rankings
The researchers used characteristics specific to Barron’s list to inform their analysis. But Barron’s is just one of the many publications ranking advisors and firms for consumers and industry watchers. Popular advisor rankings include these:
- CNBC’s Financial Advisor 100
- Investopedia Top 100 Financial Advisors
- Forbes Best In-State Wealth Advisors
Additionally, SmartAsset uses Form ADVs and other metrics to provide this advisor-focused data:
Data used to crunch individual top advisor lists can run the gamut. Common metrics include these:
- Interviews
- Questionnaires
- Experience
- Number of employees
- Online presence
- Peer recommendations
- Compliance records
- Revenue produced
- Assets under management
- Accounts under management
Other publications may focus top advisor lists on certain groups, such as top female advisors or next-generation advisors.
What Advisors Should Know About Ranking on Top Advisors Lists
Of course, not every advisor can rank as the “best advisor.” Developing the business, reach and success to appear on such a list takes time. But even newbie advisors can position themselves to take advantage of the relationship between third-party acclaim and business success. Here’s what to know:
Outreach matters. When it comes to top advisors lists, actively seeking inclusion may pay off. Sometimes, rankings require participation from the candidates. For example, Barron’s requires that advisors who wish to be ranked fill out a 102-question survey about their practice. So, filling out forms, completing questionnaires and increasing marketing and social media reach may help aspiring applicants.
Tales of the “Barron’s Curse” may be exaggerated. This study counters the concept of the “Barron’s Curse.” This theory postulates that advisors who rank on Barron’s top 100 experience an increase in client complaints and disciplinary actions.
The paper doesn’t see evidence of that outcome. “The disproportionately high percentage of customer complaints among Barron’s list members” is due “in large part to the large scale of business and long careers of this population,” the study concludes.
Marketing is a hot compliance topic this year. On a broader level, marketing is a No. 1 compliance topic as advisors gear up for the new SEC marketing rule, which updates advisor marketing practices, and must be followed by Nov. 4, 2022. Among changes are rules surrounding third-party reviews and testimonials and their use in marketing activities.
Bottom Line
Appearing in an advisor top 100 list may be a boon to advisory practices and individual advisors. Practitioners should keep an eye on popular rankings projects and consider carefully how they’re engaging in marketing and client outreach strategies.
Tips for Growing Your Financial Advisory Business
- Let us be your organic growth partner. If you are looking to grow your financial advisory business, check out SmartAsset’s SmartAdvisor platform. We match certified financial advisors with right-fit clients across the U.S.
- Expand your radius. SmartAsset’s recent survey shows that many advisors expect to continue meeting with clients remotely following COVID-19. Consider broadening your search and working with investors who are more comfortable with holding virtual meetings or spacing out in-person meetings.
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