The fifth annual Financial Times 400 list, like the previous four, is aimed at investors — such as FT readers — who use financial advisers. The FT, therefore, assesses financial advisers based on what investors care about. The methodology is quantifiable and objective.
In autumn 2016, the FT contacted the largest US brokerages to ask for practice information and data for their top advisers across the US. In doing so, we could obtain verified data on assets under management instead of relying on self-reporting by the advisers themselves.
We asked for information on advisers with more than 10 years’ experience and that had more than $300m in assets under management.
Such minimum criteria filtered out most advisers. The FT then invited qualifying advisers out of this group — a list which totalled roughly 800 — to complete a short questionnaire that gave us more information about their practices. We added that information to our own research on the candidates, including data from regulatory filings.
The formula the FT uses to grade advisers is based on six broad factors and calculates a numeric score for each adviser:
1. Assets under management can signal experience managing money and client trust.
2. AUM growth rate (we look at both one-year and two-year growth rates) can be taken as a proxy for performance, asset retention and ability to generate new business.
3. Years of experience indicates experience managing assets in different economic and interest-rate environments.
4. Compliance record provides evidence of past client disputes. A string of complaints could signal problems.
5. Industry certifications (CFA, CFP, etc) demonstrate technical and industry knowledge and obtaining these designations shows a professional commitment to investment skills.
6. Online accessibility illustrates commitment to providing investors with easy access and transparent contact information.
Assets under management accounted for an average of 66 per cent of each adviser’s score. Additionally, the FT places a cap on the number of advisers from any one state that roughly corresponds to the distribution of millionaires across the US.
We present the FT 400 as an elite group, not a competitive ranking. We acknowledge that ranking the industry’s top advisers from 1 to 400 would be a futile exercise, since each takes different approaches to their practice and has different specialisations.
The research was conducted on behalf of the Financial Times by Ignites Research, a Financial Times sister publication.