Since we launched our inaugural list last year, we have been approached by a great number of advisory firms asking about our process and methodology.
Advisors have asked if they need to submit an application form. Some have asked about whom they need to "talk to" to make their case for being on the CNBC list. Additionally, others have questioned where we actually receive the company data for the rankings.
So here goes: There are no applications or forms to submit. Also, you cannot state your case to make the list. In fact, under no circumstances should any advisory firm contact CNBC or Meridian-IQ about these rankings. Why? Because all the data we collect comes from the Securities and Exchange Commission, the Financial Industry Regulatory Authority, state regulators and state insurance commissioners.
Additionally, Meridian-IQ, the research firm, runs a report to make sure there are no broker reps employed at the advisory firms.
The research firm collects that data and then crunch the numbers.
The final step to create the Top 100 Fee-Only Wealth Management Firms list for CNBC is to apply the AdviceIQ Regulatory Compliance Review process to the master list and eliminate any firm that failed the RCR process.
The RCR process is a due-diligence process whereby each advisory firm was compared with the RCR database of all regulatory actions from all four primary regulators: the SEC, Finra, state regulators and state insurance commissioners. In order to pass the RCR process, an advisory firm cannot have any complaints, actions or disclosures from any of the above regulators.
"The AdviceIQ Regulatory Compliance Review process vets to ensure that an advisory firm is indeed lawfully registered and then reviews that firms' regulatory history from the four primary regulatory authorities," explained Nick Stuller, CEO of Meridian-IQ.
"If the advisor has even one infraction from any of the four regulators, they do not pass our RCR process," he said.
The goal in creating this list was to offer investors a ranking of advisory firms that offer comprehensive service to their clients. The financial advisory industry can be confusing and complicated at times for investors. To be sure, it is an industry that has a great deal of jargon and advisors are paid in numerous ways.
To that point, the term "fee-only" has different definitions from the National Association of Personal Financial Advisors, a trade association, and the CFP Board, a non-profit trade organization.
In fact, "fee-only" is not even an regulated term, like, for example, a registered investment advisor.
Additionally, the term hybrid advisor is also referred to as a "dually registered" advisor by many in the industry. Confusing? You bet.
The CNBC ranking focuses on advisory firms that do not have a broker affiliation, meaning no broker rep is employed by the wealth management firm.CNBC's list requires that, when it comes to investments, the firms on its list must be fee-only. This means that none of the advisory firms on the list collect commissions on any investment products.
It's been widely reported that people spend more time planning their summer vacation than they do thinking about their financial situation. That's alarming, when you consider the key role money plays in your life. What can be more important than buying that first house, putting your kids through college or planning for your retirement?
The CNBC editorial team presents our second annual list of the Top 100 Fee-Only Wealth Management Firms.
It's evident that investors need financial assistance. However, before you hire any financial professional—whether it's a stockbroker, a financial planner or an investment advisor—you should always find out, and make sure you understand, how that person gets paid, and that means fees vs. commission.
The fee-only and fee-based model has become the dominant form of the client-advisory relationship. To that point, the CNBC editorial team presents our second annual ranking of the Top 100 Fee-Only Wealth Management Firms. The firms on our list collectively manage $114,768,503,938.
In creating the rankings, the CNBC editorial team, along with Meridian-IQ, created an exclusive methodology for its Top 100 Fee-Only Wealth Management Firms rankings. Scores for each of the following measures were weighted according to a proprietary formula to arrive at a final total rank: assets under management; having staff with professional designations, such as a CFP or CFA; working with third-party professionals, such as attorneys or CPA; average account size; growth of assets; years in business; number of advisory clients and providing advice on insurance solutions.
—By Jim Pavia, senior editor at large