Imagine if you won the lottery. The only thing that could curb your enthusiasm would be a “prize collection fee.” This scam is very rampant among the geriatric set and e-mail notifications from Nigeria. The cost of the ticket was the entry fee. Any additional monetary layout is a sure sign of some form of a scam.
That brings us to Barron’s Top Advisors. While I am in no way suggesting this award is on par with a Nigerian internet operation, I have my doubts on the validity of their claims.
“Advisors pay a fee to be listed in this section, but their participation has no bearing on their place in our rankings, nor does it guarantee that they will be ranked in future years.” Something is rotten in Denmark.
Imagine working for a firm that has an employee of the month competition. The award is said to be prestigious and could lead to enhancing your income potential down the road by making your skills known to upper management. There is one catch before you can pass go and collect your $200.
In order to be eligible for participation there is an entry fee of $5,000. Since the company chooses only one winner each month, this contest could turn into a very profitable endeavor for the organization. If twenty people enter each month, $100,000 of cash would be generated in exchange for a small plaque and the cost of some wine and cheese.
If the company could market this award in an intelligent manner, they could keep this going and add more participants each year. This would grow the revenue bucket at virtually no cost to the company. Lower paid employees would be all but disqualified.
Fair minded people might say some other employees will be excluded from this honor. They could be excellent honest employees but cannot pony up the entry fee because of extenuating circumstances. They might have to take care of elderly parents or a sick child. The cost of this contest would be too much for them to bear.
Does this sound familiar? Is it possible that there are many advisors out there who don’t put revenue generation as the be all and end all for their business? They don’t charge AUM fees of over 1% and don’t collect kickbacks from fund companies.
They might spend a lot of time with each of their individual clients, limiting their revenue stream opportunities. This takes time away from free dinner marketing events to collect 10% commissions from selling variable annuities in between the choices of chicken or fish.
To say that the entry fee in a contest has no bearing on the rankings is a bit disingenuous. The pool of applicants has been compromised by this entry requirement. Obviously those firms with large revenue bases and big marketing departments will greatly skew the results.
Though these two factors have nothing to do with the quality of the advisor, the majority of applicants will use them to gain entry into this ‘competition.” This would be similar to having recent high school graduates make a donation to the college they are applying to. Without the donation, they would not be considered for admission.
If the college went on to say that the donation had nothing to do with the acceptance policy, all hell would break loose! The pool of applicants would be heavily skewed toward the wealthy and the acceptance of these students would be looked upon as kind of a sham.
Believing that choosing a “Barron’s advisor” will give you an edge is a bad idea. Marketing material should never trump what really matters for a good advisor. Though Ben Carlson will most likely never be honored by Barron’s as a “Top” advisor, according to their standards, his criteria will lead you in the right direction.
According to Mr. Carlson an advisor should speak to you in English, not jargon; be very honest; and realize not everyone is their “Ideal Client.” I would also add being intellectually forthright and not being afraid to say “I don’t know.”
None of these traits will qualify a good advisor for a Barron’s award. Since their advisors are only required to provide “suitable advice”, allowed to collect commissions, and have huge streams of revenue. I have one thing over them. I don’t have to pay an entry fee to collect an award.