We’ve all gritted our teeth whenever one of the trade magazines comes out with a list of the “top” wealth management firms, ranked from “top” to “bottom” based on the absolute least meaningful way to measure the quality of an advisory business: the amount of client assets they manage. The goal of such lists should be to identify those firms that are best at serving their clients and are managed in a healthy and sustainable way.

Does anyone seriously believe that measuring firms by their AUM serves that goal?

The firm with the most assets is the “top” firm, and the firm that provides really terrific financial planning service, but happens to have “just” $150 million in AUM, falls way down toward the bottom of the list? And the firms that don’t actually charge by AUM are, of course, nowhere to be found in the rankings.

Add to that, many of the “top” firms are not actually wealth management firms at all. And more generally, what do we know about each firm's culture and the quality of their internal management structure?


So how would you rank financial advisory firms based on a more comprehensive set of metrics, to determine their ability to service clients and the quality of their management and metrics? By what criteria would a firm with $150 million under management be ranked higher than the one with multiple billions of client assets, where firms that don’t charge by AUM at all would rank appropriately on the list?

Until Brent Weiss showed me his RIA Health Index outline, I hadn’t seen anybody give serious thought to this problem. Weiss has created a first step toward something that is long overdue in our profession: a breakdown of quality metrics for a wealth management or advisory business.

Weiss is co-founder and “chief evangelist” of Facet Wealth in Baltimore, MD. Facet is an unusual firm in the wealth management space because it serves the middle-income people that most advisory firms would put in their “C” client segmentation, and offers them comprehensive financial planning on a flat retainer basis. Bigger picture, Weiss is one of a coterie of younger advisor thought leaders who believe it’s time to rethink the revenue and business models of the emerging planning profession, and the RIA Health Index is his first attempt to define “quality” in an advisory firm in a systematic and comprehensive way.