Separating Exceptional Advisors from Good Salesmen

Tuesday, 01 March 2011 Posted in SpringReef Insights

Last week, a national full-service brokerage firm announced its desire to hire 2,400 new financial advisor trainees in 2011, a plan aimed at meeting growth goals while compensating for the anticipated forced attrition of advisors who fail to meet the firm’s minimum revenue levels.

These types of announcements are common given the focus large financial services firms place on their advisor headcount. However, from the perspective of a client advocate, this announcement represents a somewhat disconcerting commentary on the nature of the financial advice business these days.

  • Nowhere in the announcement is there a reference to or discussion of how this new group of advisors might benefit the firm’s clients.
  • On the contrary, if industry history holds true, the vast majority of these newly-minted advisors will fail over the next few years, likely damaging more than a few portfolios in the process.
  • The announcement draws attention to scale, a critical issue for financial service firms given it drives market share, revenues and profits. However, the focus on scale also drives a lower set of standards. The attention financial services firms pay to scale often leads to a muddled mass of acceptable advisors that overshadow and outnumber the relatively small group of truly exceptional advisors.

There are exceptional advisors across all business models and many firms. They exist in national, regional and independent full-service brokerage firms, registered investment advisors and private banks. Unfortunately, exceptional advisors represent less than 20% of the 300,000+ financial advisors currently active in the industry.

Finding these exceptional advisors is particularly challenging because the industry selects, trains and retains based on sales ability. Accordingly, to the untrained and inexperienced eye, it is difficult to distinguish the exceptional advisor from one who is simply a good salesman.

For those who are uncertain about a financial advisor and where they fall along the spectrum of quality, we’ve provided below an abridged version of the due diligence process developed and utilized by Aronson SpringReef to evaluate advisors. We think you’ll find the list pretty self-explanatory; however, should any client, associate and subscriber want more detail on any aspect of this process, we’d be happy to speak at any time. 

Exceptional Advisor Due Diligence

The Essential Foundation – a set of criteria that must be met by advisors we recommend to clients.

  1. Minimum seven years experience in investment management
  2. High quality compliance and regulatory record
  3. Client-aligned personal values
  4. Employment stability
  5. Transparency regarding potential conflicts, pricing and risk
  6. Focus on and experience with similar clients

Qualitative Differentiators – indicators that help us distinguish exceptional advisors from their less-talented associates, and allow us to match advisors with the needs and values of our clients.

  1. Clear end-to-end wealth management process
  2. Deep solution expertise
  3. Best-in-class solutions
  4. Clear, concise reporting
  5. Diversified idea flow
  6. Superior performance results
  7. Risk and attribution
  8. Fair pricing relative to value and complexity
  9. Client satisfaction
  10. Narrow “sales gap” 1
  11. Demonstrated client service matrix


1 Sales Gap is defined as the difference between what is promised and what is delivered.

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