We continue to take steps to improve our ranking. Last year, we expanded our analysis. Instead of basing the list on just one variable as we had in previous years, we used five variables and combined them into a weighted average. This year, we added a sixth, but more important, we also changed the way we weighted them. We gave more credence this time to the year-over-year changes in assets under management and production than we did before.
First, a little background. The six variables we used were: (1) 2012 assets under management; (2) trailing-12 month production; (3) percentage change in AUM from the previous year; (4) percentage change in T-12 production; (5) amount of fee business; and (6) the ratio of production-per-AUM. (Note: Due to deadline restrictions, we defined 2012 AUM as the amount on Aug. 31, 2012. For 2012 production, we used the 12-month period from Sept. 1, 2011 to Aug. 31, 2012.)
We assigned scores, 1 through 11, to each nominated advisor in each of the six categories. This served two purposes. First, it gave us a valid way to compare different variables, such as percentages and dollar amounts. It also served to cap the categories at the top score's range. That is, the advisor with the highest production on our list would have scored an 11 in that category, the highest possible mark. But that would not necessarily sway the entire list, because other advisors would also be in that highest bracket. Moreover, production was only one variable of six considered in the final tally.
So, why do all that instead of using just one variable, say AUM? Simple. We wanted this to be a well-rounded analysis, not merely a simple consideration of size. And to that end, we feel we succeeded. The advisors listed here are not just one-trick ponies. They are similar to a triathlete who excels in swimming, biking and running, not just a gold medalist in one and a duffer in the other two.
We feel being a renaissance advisor is an important consideration, but we know there will be those who disagree. So, as we did last year, we'll kick things off with a few criticisms that we expect to hear and we'll give you our responses.
First, this method is subjective in the formulas and the weightings that are used.
Agreed, it is. But we used standard measures (assets, production, fee business and so on). Plus, we capped their contributions to the overall scores. Generally, we feel this is a well-rounded analysis.
Another possible objection: An advisor could have $1 billion in AUM and still be marginalized on this list.
Here, we would disagree. Those categories where size counts (AUM and production) are indeed used in our final analysis. But we also account for the increases from last year. And yes, we gave those increases more weight this year than we did in the past. In that sense, we are measuring how strong you were as a business owner: how well did you grow your business in the past 12 months?
Criticism three: If you're only taking into account the past 12 months, what about the advisors who have been serving clients for 20 years?
To some extent we'd agree. Since we are looking at the past 12 months for some variables, it may have a "what have you done for me lately" feel. But to a large degree, that's business, and especially your business. (In an interview, a prospective employer is going to ask about your numbers last year, not 10 years ago.)
Finally, this list does not take into account the full value of an advisor.
True, it does not. The full value of an advisor starts with the quality of your client relationships. This list is purely numbers-driven and does not capture those aspects of your job. But the statistics also count, and this is our annual calculation of the top advisors in the channel.
Enjoy the ranking and the bios.
1. Robert Reich
Robert Reich, financial advisor at Wells Fargo in McLean, Va., has just 60 clients. But that number is perfect, he says, to run a productive and dedicated practice that seeks to deliver in three main areas: maintaining clients' present lifestyles in the future, preserving their net worth and assuring their legacy.
"All our clients are self-made — they have earned their wealth, so the primary role that we fulfill for them is to maintain, preserve and transition the wealth that they have created," Reich says.