Kitces Asks: How Should 'Best Advisors' Be Ranked?

What is a “best” advisor?

That’s the question on the mind of popular blogger, wealth manager and financial-planning speaker Michael Kitces.

He requested advisors’ insights on the topic on Facebook this week.

“We’ve all seen those lists of ‘Best Advisors’ that really just measure [assets under management] and/or revenue of the advisor, and nothing about their actual quality and whether they’re really the ‘best’ at anything or not,” Kitces wrote.

What is the best way to objectively measure who is the “best” in the business using an approach that publications can “scalably measure and implement?” he asked. “What else should be considered (that can be reasonably measured)?”

1. How Are the Clients Doing?

It’s time to include information on client retention, client surveys and basic planning criteria (such as the percent of working clients with disability insurance, the percent of clients with a three-month emergency fund, etc.), Paul Compeau, a founding partner at BridgeWise Financial Partners, commented on Kitces’ Facebook query.

2. Written Plans

Look at the percent “of clients with a written plan addressing risk management and a portfolio and savings rate aligned with the plan’s needs,” along with executed insurance and estate plans, suggested Beyond Wealth Management advisor Chris Drouin. Plus, consider the percent of clients who get a full update/review of these matters every 12-18 months.

Kitces’ caveat: “I fear that most advisors will say their clients have ‘a plan,’ regardless of how substantive it really is (vs. just being the output of planning software).”

3. Client Input

Ranking or rating “best advisors” must be left to the clients, says Hubris Global Wealth advisor Eric McLoyd. “The number of clients who met their overall financial goals and were prepared well for risks should be at least some of the factors considered.”

4. Comprehensive Planning

Measure top advisors based on the “implementation of a comprehensive plan that leaves no stones unturned, and accountability to implement the action items recommended by the plan,” according to Matlin Financial Services President Curtis Matlin.

For an even more “comprehensive” measuring stick, Matlin suggests looking at the Higher Standard of Care checklist developed by Ken Haman, the managing director of the AllianceBernstein Advisor Institute.

5. Performance Measures

Turn to performance metrics, such as the Sharpe ratio, information ratio and outcome results, suggests Glenn Moore of Gibraltar Financial.

Other metrics could include a look at five- and 10-year results tied to the stated goals and objectives that were defined at the start of the relationship. “Did you execute what you said you would do?” asked Moore.