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How Am I Doing?

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That is the question that Albridge Solutions wants to help advisors answer. The firm has developed a report that rates advisors versus peers in four categories: performance, activity, diversification and growth. The information is for advisors’ own use, meaning Albridge is not currently planning to publish ratings the way Morningstar does, but advisors with good ratings might want to use the ratings in promotional literature or advertising, subject to regulatory approval. The Albridge Advisor Report is for advisors “who are taking a strategic view of their business,” in terms of practice management, says Rob Gregov, director of information services at Albridge. For the Advisor Rating, Albridge uses statistics on an advisor’s risk-adjusted rates of return, asset turnover, allocation, diversification, and sales growth, benchmarking those against a peer group of 5,000-10,000 like advisors. The company uses a percentile system based on the bell curve in which the top 10% of advisors get a five-star ranking, the next 20% get four stars, the next 20% get three stars, the next 20% get two stars, and the last 10% get one star.

The ratings could be used in a number of ways, according to Gregov. An advisor with the top rating might use this to differentiate her practice, telling clients “I am a five-star Albridge-rated advisor,” and asking how that compares with a client’s other advisors. Gregov says having a percentile ranking versus peers could help in other ways as well. If an advisor is a heavy user of a particular firm’s mutual funds and sees that peers use a lower percentage, perhaps that gives the advisor an advantage in the next round of fee negotiations with that fund company. Meanwhile, if an advisor sees that his assets are growing by 20%, but his peer group is growing by 30%, he can look at “very specific things that other people are doing to be successful,” says Stuart Tarmy, VP of marketing at Albridge, including what types of investments they are using and in what allocations. All of this is done in aggregate-based on an advisor’s particular peer group.

Albridge uses transaction data that it gets daily from about 100 financial institutions that are clients for its other services to calculate the Advisor Ratings and in the Advisor Report, which is delivered quarterly in an electronic PDF format. To be rated, an advisor’s broker/dealer or clearing broker has to be using Albridge’s transaction-oriented services. Pricing will be variable, according to assets under management.