I’ve never trusted whatever version of Who’s Who has contacted me over the years. The various pitches were always full of flattery — not only were they willing to honor me, but they were even willing to throw in a book so handsomely bound that the Franklin Mint would have been jealous. The “honor” was nothing more than a sales pitch, an attempt at buying credibility, and since I wasn’t naive and didn’t need to promote myself, I passed on accepting the award.
Credibility is likely the first thing you look for in a financial advisor. Because of this, purchased credibility has long been in high demand. Publishers have tried to fill the demand by creating awards that are, essentially, buying credibility. Typically, the publishers will contact an advisor to let them know that they’ve been selected – often, they claim, by their peers – as one of the top advisors in the area or a top advisor in his field. If the advisor is really good, he might even be awarded a certain number of something – say, 5 diamonds or 3 stars1. The publisher, out of apparent concern the advisor will keep the award to him or herself, usually offers an array of plaques, certificates and magazine inserts so that the advisor can share the good news with the world.
Brokerage firms knew credibility was an issue as well. As sales machines, they constantly recruited new brokers and often those brokers had no relevant experience. Industry designations would help demonstrate knowledge, but some traditional designations like the CFP, CFA and CPA could take years to earn even if the broker could pass the exam or exams on the first try. So, brokerage firms created their own designations in-house and as you might expect, brokers were able to earn these designations much more quickly than the traditional ones, thus buying credibility. Designation in hand (and on business card), the brokers were able to begin bringing in revenue for their firm.
All of this can make separating what is meaningful versus what is empty marketing difficult in your search for an advisor. It is just one advisor’s opinion, but I think most awards are fluff. There are some – like lists of biggest firms – that are based on verifiable, objective metrics, but those metrics are only useful for you if working with the biggest or fastest growing firm. If you really want to know how well an advisor will serve you, ask your friends or colleagues for recommendations. If you’ve narrowed your search down to a prospective advisor, ask him or for a reference. While no advisor is going to knowingly provide a poor reference, even carefully chosen references can be useful.
As to determining whether or not an advisor is knowledgeable, see what sort of designations they’ve earned and what is required to earn and maintain those designations. Did they have to pass an exam, and does the designation require that they act as a fiduciary or follow a process that is beneficial to the clients? Is continuing education required to maintain the designation? Even if an advisor doesn’t have a designation, long years of experience focused on serving clients in your particular situation is a good sign they have the knowledge needed to serve you well.
- I am anxiously awaiting the publisher who is bold enough to symbolize excellence via dollar signs or gold bars. ↩