14 April 2012

Advisor Rankings - treat with caution

Barron's Magazine regularly publishes a list of  'Top Financial Advisors'. While this list covers only US-based advisors it creates more questions than it answers. First of all it should be no surprise that there is more than a hint of self-promotion as advisors apply to have their performance reviewed by the magazine. While we value Barron's highly and enjoy reading it for more than 45 years (We hope our age is not frightening readers away) the editors are faced with a major problem when tackling the question of actual investment performance - not performance as measured by assets under management (or advice). The latter measure is used by Barron's as a proxy for good performance - more assets should normally be a sign that the advisor is doing a good job. But there are limitations to this imputed correlation and investors would be well advised to have a look behind the glitz and glamour of a good marketing presentation and have a close - and impartial - look at the performance, risk and fee levels associated with any investment advisor they entrust some part of their investment funds to. On a closing note we can but admire the superhuman skills of some of the advisors listed as they seem to be able to handle 1,000 and more accounts. In that respect they really deserve a 'top' rating (Honi soit qui mal y pense, as the Queen would say)