Whether you’re looking for the best sushi restaurant in an unfamiliar city or trying to decide what movie to watch, chances are you’re going online to conduct a search. And if you’re like most people, your primary resource will be one of the many websites that publishes third-party recommendations and rankings.

These “Best of” and “Top 10” lists are not only a quick way to narrow down your search, but they also tend to be reliable because they’re generated by users whose reviews are based on personal experiences. In fact, research shows that 84% of consumers trust online reviews as much as a recommendation from a friend or family member.¹ Another study found that users who consult travel sites such as TripAdvisor can be swayed to choose a more expensive hotel if the reviews are especially positive.²

Given the extent to which consumers rely on rankings for everything from vacation destinations to dentists, I have often wondered how this translates to choosing a financial professional. A new study from two researchers at the University of Kentucky offers some interesting insight into that question.

Research finds a connection between inclusion on top advisor lists and asset levels

The study, conducted by William Gerken and Morteza Momeni, focused on Barron’s Top 100 and Top 1,000 Advisor lists, which are published by the magazine every year in March. Using a proprietary methodology consisting of 102 points of data, these lists recognize financial professionals from across the U.S. who Barron’s calls “the best in the business.”

Most financial professionals who are named to one of the lists promote the achievement on their website and LinkedIn profile. Some opt to hang an engraved plaque on their office wall. While it seems only natural that advisors would want to share their top ranking with current and prospective clients, given my interest in behavioral finance, I have always wondered what individual investors think of these lists. Do they pay attention to the phrase “Barron’s Top Advisor” when they visit their advisor’s website or LinkedIn page, or trust their advisor more because of his or her inclusion on the list?

By analyzing Barron’s lists from 2009 through 2020 using sophisticated statistical techniques, the University of Kentucky researchers found evidence that suggests individual investors do indeed take notice.

First, Gerken and Momeni explored advisor-owned practices with fewer than 50 employees and more than $100 million in asset under management. Within that group, they found that advisors named to Barron’s Top 1,000 list increased their assets by approximately 10% within the following year compared to those who were not named to the list. Additionally, among all advisors, the study found that those in the Top 100 ranking increased their assets by 13-17% relative to those in the Top 1,000 (but not the Top 100) ranking. Interestingly, the increase in asset levels was most pronounced for those advisors who just make the Top 100 list compared to those who just miss it, suggesting that individuals likely assign greater significance to more exclusive rankings (i.e., top 100 vs. top 1,000).

Readers may be wondering how researchers from the University of Kentucky arrived at these calculations using publicly available information. It’s a bit weedy, but the technique is called a fixed effects linear regression model. In English, this model “throws out” all the possible differences between advisors that can account for changes in asset under management. Examples may include varying approaches for managing money or the different levels of effort expended to find new clients. By eliminating these differences, the model is able to isolate the effect we are interested in – the relationship between being on the Barron’s list (versus not being on the list) and the subsequent change in assets under management.

Additional findings

There were two other findings worth noting. First, the magnitude of the benefits financial professionals reap from their inclusion on one of the Barron’s Top Advisor lists is greater for both newer advisors and those from smaller firms.

Second, advisors in the Top 100 and Top 1,000 are less likely to have misconduct complaints compared to their peers. This latter finding is significant because it dispels the “Barron’s Curse,” which is the notion that advisors on the list tend to receive more complaints. (While the total number of complaints may be high for this group, the researchers explain this is because these advisors serve many more clients over longer careers compared to the average advisor.)

The value of third-party endorsement

The research makes a compelling case that inclusion on these Top Advisor lists sends a signal to the public that a financial professional has reached a certain standard of excellence. The findings indicate that, just as consumers trust the ratings on sites like TripAdvisor and Yelp, investors place greater trust in advisors who are named to Barron’s highly publicized lists – and that increased trust can lead to increased assets.

While this study focused only on the Barron’s lists, there are of course a number of other entities that release similar rankings for financial professionals. I would encourage advisors to explore how they might leverage these types of opportunities to help elevate their public profiles with current and prospective clients. Third-party validation and endorsement can be a powerful promotional tool, especially since online reviews have become such a common resource for consumers.

Lastly, I would encourage financial professionals to take the time to read Gerken and Momeni’s paper, “Third Party Quality Certification in the Market for Financial Advice,” for a more detailed look at the methodology behind their study and the implications of their findings.

¹ “84 percent trust online reviews as much as a personal recommendation.” Inc.com, July 2017.

² B. Noone, K. McGuire. “Pricing in a social world: The influence of non-price information on hotel choice.” Journal of Revenue and Pricing Management, 2013.