In the wealth management industry, production has always been where the rubber meets the road. But for years, the financial media and the industry itself have heavily focused on assets under management as a gauge of success.
Ranking advisors based on their AUM makes less sense as advisors generate more of their revenue from things other than managing client assets. Production now comes from referrals to other banking products like personal and commercial loans, underwriting and mortgages. Meanwhile, market forces are exerting downward pressure on many traditional sources of wealth management revenues.
That's why, this year for the first time, On Wall Street has ranked the top 40 advisors under the age of 40 by their T-12 productionnot AUM. The most obvious result of this new ranking criteria is the number of winners on this year's list who haven't appeared before. This is because many of this year's winners have not had a high enough AUM to meet the AUM minimum of $350 million that we've used in past Top 40 rankings. For 2013's list, we eliminated the AUM minimum entirely.
This brings us to the second significant shift that you'll notice in this year's list. The benchmark "1%-of-AUM" rate of production is eroding. While long considered the industry norm, that rate has started to become less dominant as AUM and production disintermediate. We expect that trend to escalate in years to come as advisors become distributors for more of the products offered throughout their firm.
The rules for this year's list were as follows: all nominees had to provide their T-12 and AUM as of Sept. 30, 2013; both T-12 and AUM had to be attributable entirely to the individual advisor, not a team as a whole; advisors had to be nominated by their firm; only compensable production could be included; the advisor had to have a clean compliance record; and the nominee had to be under age 40 as of Dec. 31, 2013.
We congratulate this year's winners and look forward to tracking their continued success as they evolve into the next generation leaders of the wealth management industry.
Click here for a chart of the Top 40 Advisors Under 40.
TOP 10 ADVISORS UNDER 40