Ratings Methodology for Financial Advisors by City
Detailed information about how we rate and rank advisors and the factors we consider in our assessments is below.
How our financial advisor ratings work: Our ratings formula calculates a base rating for each financial advisor overall, from 1.0 to 5.0. The rating is based on core features of the advisor — the factors that matter most to the average investor and directly affect how investors choose an advisor and use their services. Those are:
• Proportion of high-net-worth clients
• Clients per advisor
• Key fees and offerings
• Assets under management
• Firm age
How our financial advisor ratings work: Our ratings formula calculates a base rating for each financial advisor overall, from 1.0 to 5.0. The rating is based on core features of the advisor — the factors that matter most to the average investor and directly affect how investors choose an advisor and use their services. Those are:
• Proportion of high-net-worth clients
• Clients per advisor
• Key fees and offerings
• Assets under management
• Firm age
Data collection and review process
NerdWallet reviews financial advisor data from thousands of SEC Form ADVs. Advisors that reported, among other things, any of the following in Part 1 of their Form ADVs were not eligible for consideration:
• Very recent initial registration with the SEC.
• No website.
• Principal offices outside the United States.
• Organization under the laws of a non-U.S. country.
• Registration as an internet adviser.
• No employees who provide investment advisory functions.
• No high-net-worth clients.
• No non-high-net-worth clients.
• Less than $100 million in assets under management.
• A low proportion of assets under management attributable to individual clients.
• No financial planning services and portfolio management for individuals and/or small businesses.
• Primary engagement in another type of business.
• Convictions, charges, pleas, revocations, suspensions, or similar enforcement actions from legal or regulatory authorities.
NerdWallet then applies a proprietary weighted scoring system to the remaining advisors in the city's designated marketing area. We then review ADV Part 2 data for the highest-scoring firms. We contact providers and collect data from provider websites when necessary. The highest-rated advisors appear on the lists.
Information updates
Our writers and editors conduct proactive information updates and research for reviews on an annual basis. Throughout the year, we maintain contact with providers and update any changes to their offerings. We also adjust our rubrics and ratings methodology as needed based on changes to the industry, designated marketing areas or the scope of products or providers we're reviewing.
Factor weightings
The weighting of each rating factor is based on our team’s assessment of which features are most important to consumers and which ones impact the consumer experience in the most meaningful way. Those factors vary depending on the category.
The review team
The review team comprises seasoned writers, researchers and editors who cover stocks, bonds, mutual funds, index funds, exchange-traded funds, alternative investments, socially responsible investing, financial advisors, retirement, and investment strategy. In addition to appearing on NerdWallet, the work of our team members has been published in The New York Times, The Washington Post, Forbes, USA Today, Bloomberg News, Nasdaq, MSN, MarketWatch, Yahoo Finance and other national and regional media outlets. Each writer and editor follows NerdWallet’s strict guidelines for editorial integrity.
The combined expertise of our investing team is infused into our review process to ensure thoughtful evaluation of products and services from the customer perspective. Our writers and editors together have decades of experience in writing about finance.
The combined expertise of our investing team is infused into our review process to ensure thoughtful evaluation of products and services from the customer perspective. Our writers and editors together have decades of experience in writing about finance.
Key fees and offerings
This category analyzes whether the firms offer the following:
• An AUM fee structure.
• An hourly fee structure.
• A fixed fee structure.
• Portfolio management for individuals and / or small businesses.
• Financial planning services.
• Educational seminars.
• Non-advice products/services.
• An AUM fee structure.
• An hourly fee structure.
• A fixed fee structure.
• Portfolio management for individuals and / or small businesses.
• Financial planning services.
• Educational seminars.
• Non-advice products/services.
Clients per advisor
For this category, we measure and evaluate the ratio of reported individual clients to number of reported advisors at the firm.
Proportion of high-net-worth clients
This category measures and evaluates the ratio of individual clients the firm indicates are non-high-net-worth clients as a percentage of the firm's total reported individual clients.
Age of firm
A firm earns the highest rating in this category if its SEC status effective date is at least 10 years ago. It earns the lowest rating in this category if its SEC status effective date is less than four years from the date we obtain the data from the SEC.
Assets under management
Firms with $250,000,000 or less in assets under management receive the lowest rating in this category. They receive the highest rating in this category if they have at least $2 billion in AUM.