Does Dow Jones' emphasis on advisor AUM harken to wirehouse production?

August 30, 2009 — 5:31 AM UTC by Brooke Southall


Editor’s note: I am a fan of Barron’s and I have read it since 1985. I like Alan Abelson. I like the way the staff reporters write and the way they discuss stocks. I also believe they do a good job of picking stocks and warning against bad ones. I appreciate that Barron’s endorses the independent advisory channels by creating its “Top” lists. Advisors are honored enough to show up at the conferences that Barron’s holds to honor them. It’s the one of the few places that some of the custodial executives ever get to meet.

Still, I bought a copy of Barron’s to review its latest “Top 100” list of independent advisor this morning [five dollars, ouch] and I immediately decided that I needed to write about it. Advisors hold the Top 100 list in high esteem and it’s a huge marketing coup to be so named. As I look down the list, I see many RIAs I know or know of personally that I consider to be highly respectable. But I’m concerned, too, about the many high quality advisors who no doubt applied and got rejected. Did they deserve it? Did the 41 advisors who were removed from the list deserve the demotion?

Because the list came out over the weekend, I was not able to reach Barron’s for comment. But hopefully this list helps put “Top 100” selections into perspective.

IMPORTANT UPDATE: Since this article was originally published, Barron’s did respond to my phone calls. Click here to read about it

Barron’s published its “Top 100 independent advisors” issue and here are the top 10 notable things about the list:

1.) Bigger practices are given points for their size because it suggests the practice posts superior investment returns, according to Barron’s. “Advisors who have attracted and kept large volumes of assets generally have strong performance,” the article states. The article gives no supporting evidence of this supposition. Recall that Bernie Madoff was not hurting for assets under management.

2.) The study heavily discounts the value of institutional assets in its ratings but it doesn’t say why. Why would assets managed for an endowment or a foundation be considered lesser assets? Mightn’t more of these assets suggest that the firm adheres to tighter disciplines?

3.) Barron’s asks how many assets an individual advisor manages and not how many assets that a firm manages. This methodology seems to weigh against advisors who work for firms that manage assets as teams. Managing assets as a team is arguably more commendable because books of business attributed to individuals are generally associated with brokers from wirehouses.

4.) Barron’s says it awards points for quality of the practices but it says nothing about how quality is measured.

5.) Barron’s accords Ric Edelman perfect rating of 100 out of 100 but its accompanying article offers no commentary about Edelman. RIABiz published a feature story about his company’s rollout of a national strategy. He jumped 38 places from his #39 showing last year and. Edelman was #2 on the Barron’s list in 2007. On the fall-off from #2 in 2007 to #39 in 2008, he says that he and the editors at Barrons decided there was an error either in the way that his firm provided the data or the way they interpreted it.“My attitude is that when they saw the big drop, they should have called,” he says. “They agreed.”

6.) Making matters more opaque, Barron’s only published interviews with five of the advisors in its top 100.

7.) Barron’s devotes only five out of its 83 pages to its own study, which was the cover story for the issue.

8.) Its Top 100 study included 560 nominations in 2009, up from only 200 nominations last year. This increase in applications is impressive in a year when advisors presumably are cutting back on marketing expenses. Applying for these kinds of recognitions consumes the time and resources of a practice. This higher application rate strikes me as highly commendable and it lends credibility to the study.

The leap can be attributed to Barron’s assuming complete editorial control of the list, which makes participating in it more appealing to independent advisors, Edelman says. The bigger applicant pool and the tumult in the markets probably explains the many new names on the list, he adds

In the past, the list research was underwritten by big firms in the industry, Edelman says, and there was a perception among advisers that those sponsoring firms put forward their top names. He adds that he believes that that was a perception, not reality.

9.) What may explain the uptick decribed in #8 is that this version of the study is the first one completed since Dow Jones & Co. acquired Winner’s Circle, the Boca Raton consulting company, on Sept. 25 last year.

10.) The article refers to independent broker dealers as “boutique brokerages.” What’s up with that? The study identifies two Ameriprise advisors and five Raymond James advisors under those brands in its top 100.

Elizabeth MacBride contributed to this article

Share your thoughts and opinions with the author or other readers.


Kristen Luke said:

August 30, 2009 — 5:49 AM UTC

It doesn’t surprise me to see an increase in applications. Getting your name on the Barron’s Top 100 List is worth the time it takes to complete the nomination process. It is the best kind of marketing – free and adds credibility. I had a client earlier this month tell me they wanted to apply next year, so I have a feeling that number is going to keep increasing in the next few years.


Brooke Southall said:

September 1, 2009 — 10:19 PM UTC

Thanks, Kristen. I have a call in to Barron’s to try to get much more information about the future criteria and the rationale for the existing system. Does anyone know exactly how much work it is to the application?


Don Davidson said:

September 21, 2009 — 7:03 PM UTC

The basic application process is not that bad. The entry of data for most would take a few hours max. After everything is run through compliance the entire process is usually complete within a day or two.


Benjamin said:

October 29, 2012 — 7:26 PM UTC

So how does the nomination work. What is the check on an advisor just making up #s? Does his/her firm’s compliance department have to sign off on his/her application to barron’s? Are there any advisors that are unhappy with this process? Is the data always accurate?

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