Impact – Wealth Management


Why Impact May Never Be Ranked on a Top Advisor List

This past week Barron’s announced their 2024 list of “America’s Best Financial Advisors“.  In the financial planning world, awards from industry giants like Barron’s are often coveted and pursued by financial advisors.  And clients understandably see these awards as impressive.

So why would we tell you that Impact Wealth Management will probably never make it onto a top advisor list??

Let’s take a closer look at the criteria required to receive a spot on the Barron’s Top 1200 list.

Criteria Misconceptions:

Contrary to popular belief, inclusion on “America’s Best Financial Advisors” list has nothing to do with choosing good investment strategies.  Industry awards are not typically based on portfolio performance or even client satisfaction.

Wait, huh?

So how does Barron’s determine who deserves to be ranked as “America’s Best”?  Barron’s states:

The rankings are based on data provided by around 6,000 of the nation’s most productive advisors. Factors included in the rankings: assets under management, revenue produced for the firm, regulatory record, quality of practice, and philanthropic work. 

There is a lot to unpack in these sentences so we’ll break it down.

The Real Criteria

The rankings are based on data provided by around 6,000 of the nation’s “most productive advisors”. For those of you who aren’t familiar, in the financial industry the word “production” refers to the amount of revenue or fees you collect from your clients.

According to Barron’s, the selection of “America’s Best Financial Advisors” comes down to 5 criteria: assets under management, revenue produced for the firm, regulatory record, quality of practice, and philanthropic work.  There is no explanation provided about how these factors are weighed, but I can tell you that in order to even apply for this award, you must first have a minimum number of assets under your management.

If you have enough assets under management to apply, the next criteria listed is “revenue produced for the firm”.  Though Barron’s doesn’t specifically state, presumably more revenue is viewed more highly.  If this is the case, an advisor that charges fees based on the percentage of their client’s assets will almost always “outrank” a firm like Impact that charges a fee that is capped even for large portfolios.

For example, if you have a $3M portfolio, a 1% fee equates to $30,000 each year in “production” for your advisor.  If you are working with a firm like Impact, the most you’ll pay for the same $3M portfolio is $8,500. Furthermore, an advisor that charges MORE than 1% on large portfolios creates more “production” for their firm than the advisor who charges only 1%.  So in essence, rankings tend to favor firms with higher fees.

The next three criteria are a little more vague: regulatory record, quality of practice, and philanthropic work.  Barron’s doesn’t tell us how these criteria are judged or verified.  It does tell us that it’s based on “data provided by” the advisor.

Client-Centric Approach:

At Impact Wealth Management, we firmly believe that effective advisory services can only be provided to a limited number of clients. This approach allows our advisors to dedicate the necessary time and attention to each of their clients.

We also firmly believe that a flat fee model is a more transparent and fair way to charge our clients.  We are steadfast in our belief that the complexity of your portfolio does not necessarily increase with the size of your portfolio.  The price you pay for financial advice shouldn’t necessarily increase with the size of your portfolio either!

Financial advisors who limit the number of clients they serve and limit the amount of money they charge those clients will never rank on a list that prioritizes production and assets under management.

Autonomy and Individual Advisor Revenue:

To increase the odds of winning awards such as Barron’s, many multi-advisor teams report the production of their entire team under one advisor’s production number. This is an acceptable practice by industry standards, but it doesn’t feel very honest to us. Each of the advisors at Impact takes “credit” only for the revenue that they individually contribute to the practice.  We are a team.  We celebrate the contribution that each advisor makes to the practice, and we give credit where credit is due.

If all three of our advisors reported their “production” under one advisor, that advisor would probably have a better shot of winning industry awards.  But we will NEVER ask our advisors to do this.

The Bottom Line:

Awards like “Barron’s Top 1200 Advisors” hold value in the financial industry and these lists undoubtedly include some really awesome financial advisors.  But these lists do not reflect the core principles and business model of every firm.  Because of the structure of our practice, it is extremely unlikely that any of the advisors at Impact will ever appear on one of these lists.

And we’re ok with that.

At Impact, one of our core values is “Pursue Greatness”. Greatness is not an accolade to achieve, it’s a lifestyle to adopt.  It’s not something that you eventually earn, but rather a daily choice.  A choice to do the right thing even if that means the industry will overlook you for awards.

We are more concerned with the hard work of becoming better each day… better advisors to our clients, better leaders in our communities, better friends, and better people.

Important Disclosures

Throughout this site, we went out of our way to present unbiased data believed to be from reliable and respected sources. However, its accuracy, completeness, and relevance are not guaranteed, and no responsibility is assumed for errors or omissions. Investing involves risk. As a general rule you should only trade in financial products that you are familiar with and understand the risks associated with them. Impact Wealth Management LLC is a fee-only Registered Investment Advisor (RIA). We are based in beautiful Sioux Falls, SD and regulated by the State of South Dakota and Arizona.