THE WALL STREET JOURNAL. Thursday, March 19, 2020 |S3

inancial advisors are scrambling

to react to coronavirus headlines—

reassuring clients, reviewing

allocations, and rethinking how

their teams work together. As that

story develops, however, they are

preparingforanotherthat’snearing

its peak: Regulation Best Interest, or

RegBI,whichtakeseffectinJune.

Thelegislation,enactedbythe

SecuritiesandExchangeCommis-

sion, bars broker-dealer advisors

fromplacingtheirowninterests,or

theiremployers’,abovethoseoftheir

clients. Previously, only Registered

InvestmentAdvisors,orRIAs,were

held to a similar standard of care;

thoseworkingatWallStreetfirms

adheredtoalooserstandardthat

required them to make “suitable”

investment recommendations.

Regulatory differences between

RIAsandWallStreetadvisorswill

remain,butRegBIbringsthewealth

management industry a giant step

closer to a uniform standard of

care—a big win for clients.

“Ithinkit’sgoingtoraisethe

qualityofadvicefortheindustry,”

says Jim Hays, president of Wells

FargoAdvisors,whichcomprises

about 13,500 financial advisors.

As they race to comply with the

newrules,advisorsfindthemselves

guidingclientsthroughthemarket

roller coaster. They say clients are

generallycalmbuthavequestions.

“Itbasicallyboilsdownto,‘AmI

gonnabeOK?’”saysAndySieg,who

oversees more than 14,700 brokers

as head of Merrill Lynch Wealth

Management. “They’re not panicked,

though.Theyjustwantreassurance.”

ErinScanell,CEOofMercerIs-

land, Wash.–based Heritage Wealth

Advisors, says his team members

havesentletterstoalloftheir5,000

clients,andmostofthe200orso

whohaverespondedwanttostaythe

course or look to buy more stock.

InselectingourTop1,200ad-

visorseachyear,Barron’saimsto

pinpointthosewhoalreadyprovide

exceptional client care. The group

this year—state-by-state listings

startonpage9—isalittlegrayerbut

more prosperous than it was five

yearsago.Theaverageageofthe

advisorsonourlisthasclimbedto

55from54,whiletheclientassets

managed by their teams have grown

24%since2016,toanaverageof

$2.8 billion.

Whathasn’tchangedistheTop

1,200’sclient-retentionrate:Ithas

held steady through the years at

98%.Our2020rankingfeatures

nearly 200 advisors who weren’t on

lastyear’slist.

TheTop1,200aredrawnfrom

all50states,plustheDistrictof

Columbia.Thisrankingisthe

largest and most comprehensive

oftheannualBarron’sadvisor

listings. It includes a cross section

of private-wealth advisors, from

independentswhoownandoperate

theirownpracticestoadvisorsfrom

the large Wall Street firms.

Thisspecialreportliststhetop

advisors in each state, with the num-

berofrankingspotsdeterminedby

each state’s population and wealth.

Therankingsarebasedonassets

under management, revenues gener-

ated by advisors for their firms, and

thequalityoftheadvisors’practices.

Investment performance isn’t an ex-

plicit criterion because performance

is often a function of each client’s

appetite for risk. In evaluating advi-

sors, we examine regulatory records,

internal company documents, and

100-plus points of data provided by

the advisors themselves.

In this time of turmoil, many

industry leaders welcome Reg BI,

buttheyalsonotethatcompliance

createsanewlayerofworkforthem

andfortheirteams—includingnew

disclosures to clients and copious

record-keeping behind the scenes.

RegBIwon’taffecteveryfinancial

advisorinthesameway.Itwillhave

thegreatestimpactonbrokerage

firms, which will need to upgrade

fromalooserregulatorystandard.

Thebestadvisorslookedforinvest-

mentsthatcombinedsuitability

with low costs to the client. But

the suitability standard left open

the possibility that advisors would

chooseasuitableinvestmentwhose

fee structure benefited the firm or

the advisor, rather than the client.

RIAs, on the other hand, sell

advice rather than investments.

They’reheldtoatougherclient-care

requirement known as the fiduciary

standard,whichmeanstheymust

place clients’ interests ahead of their

own.Theytypicallychargefeesfor

advice,ratherthancollectingsales

commissions.

Thelineshaveblurredoverthe

years,asbrokershaveadoptedcom-

monRIApracticeslikechargingfees

insteadofcommissions.Butevenaf-

terJune30,differentstandardswill

continuetoapplytobothmodels.

“Transparency regarding fees

andconflictsandaffirmingsuit-

ability of investment strategies is

good for consumers,” says Stephan

Cassaday, the head of Cassaday &

Co., in McLean, Va.

RegBIrequirementsinclude

FormCRS—ashort,plain-English

overview that spells out advisory

costs, fees, and potential conflicts

ofinterest,aswellasanadvisor’s

regulatory history. Brokerage firms

will be required to create and enforce

rulesarounddisclosingoreliminat-

ingconflictsofinterestforinvest-

ment recommendations. They’ll

also have to identify and mitigate

anyincentivesforbrokerstomake

recommendations.

Brokers will also have to show

whythey’reusingacertainkind

of account. “Reg BI is not perfect,

butIdothinkit’sreallygood,”says

Dean Harman, founder of Harman

Wealth Management, outside Hous-

ton, which manages $435 million

of assets. “Advisors are definitely

goingtohavetoactintheclient’s

best interest.”

Complyingwiththenewrules

willkeeptheindustrybusy.Twoof

the biggest tasks will be document-

ing the justification for investment

recommendations and reviewing

accounts to make sure they meet the

new regulations, says April Rudin,

head of The Rudin Group, a market-

ing firm serving the industry.

While there’s plenty of grumbling

about the work associated with Reg

BI,italsopresentsadvisorswitha

“marketing moment,” Rudin says.

Practicesthatalreadyholdthem-

selvestoahighstandardhavean

opportunitytore-explainthatfactto

clientsandprospectiveclients.“This

canopenthedoorforavarietyof

client communications that can help

cement or reinforce relationships

betweenadvisorsandtheirclients,”

Rudin says.

RegBIhasitscritics,whosaythat

itpermitsfirmstocontinuepoor

practices as long as they’re disclosed.

“Theremaybeaslightbenefitto

having the [best interest] standard

madeexplicit,butwe’reskepticalthat

it will significantly change either the

kinds of enforcement actions that are

broughtorcommonindustrypractic-

es,”saysBarbaraRoper,directorof

investor protection at the Consumer

Federation of America.

Severalstates,andatleastone

advisoryfirm,havesuedtheSEC

inanattempttoblockthenew

rules. Massachusetts, arguing

that the SEC’s rule is inadequate,

recentlyfinalizeditsowninvestor

protection rule, and other states

mayfollowsuit.

Regulators, politicians, and

industry groups have spent years at

oddsoverhowtoregulatethefirms

andpeoplewhohelpuschooseour

investments.Butnoregulation

can replace consumers’ duty to ask

tough questions.

Essentially, such questions might

comedownto,“Istheinvestment

that you just recommended to me

the most straightforward, inex-

pensivemeanstoreachmygoals?”

Good advisors—like those in the

pagesthatfollowthisone—will

welcome the scrutiny.

By STEVE GARMHAUSEN

Illustration by KEITH NEGLEY

TOPS IN THEIR STATES

SECregulationstakingeffectinJunewillrequire

morewealthmanagerstoputclientinterestsirst.

It’s a development the best inancial advisors welcome.

F

Tony Smith UBS Financial Services Ala. $3,766

Jeff Leonard Raymond James Alaska $930

Trevor Wilde Wilde Wealth Management Group Ariz. $1,160

Allen Homra Edward Jones Ark. $693

Gregory Vaughan Morgan Stanley PWM Calif. $24,112

Shawn Fowler Morgan Stanley PWM Colo. $3,468

Jeff Erdmann Merrill Private Wealth Management Conn. $9,049

Marvin McIntyre Morgan Stanley PWM D.C. $3,755

Kimberlee Orth Ameriprise Financial Del. $2,832

Thomas Moran Moran Wealth Management Fla. $3,146

Rod Westmoreland Merrill Private Wealth Management Ga. $5,508

Matthew Megorden UBS Financial Services Hawaii $516

Robert Brian King RBC Wealth Management Idaho $675

Paul Tashima UBS Financial Services Ill. $25,176

Wm. Craig Dobbs Morgan Stanley Graystone Ind. $29,352

Bryan Boesen Morgan Stanley Wealth Management Iowa $593

Tim Sutton Creative Planning Kan. $1,019

Barry Barlow Merrill Lynch Wealth Management Ky. $882

Charles Simmons Ameriprise Financial La. $2,850

Brian Clement RBC Wealth Management Maine $565

Robert Scherer Morgan Stanley Graystone Md. $9,200

Raj Sharma Merrill Private Wealth Management Mass. $7,430

Charles C. Zhang Zhang Financial Mich. $3,606

Brad Wheelock RBC Wealth Management Minn. $1,600

Bill Rush Mosby UBS Financial Services Miss. $1,099

Michael Moeller Wells Fargo Advisors Mo. $1,830

James B. Stack Stack Financial Management Mont. $1,338

Jonathan Beukelman UBS Financial Services Neb. $1,852

Randy Garcia Investment Counsel Nev. $1,234

Robert Bonfiglio Ameriprise Financial N.H. $545

Stephen Hess J.P. Morgan N.J. $9,663

Michael Stevens Merrill Lynch Wealth Management N.M. $863

Lyon Polk Morgan Stanley PWM N.Y. $20,240

William Oliver Wells Fargo Advisors N.C. $1,387

Troy Nelson Edward Jones N.D. $635

Valerie Newell MarinerWealthAdvisors Ohio $3,250

James Johnson Morgan Stanley PWM Okla. $765

Judith McGee Raymond James Ore. $648

Grant Rawdin Wescott Financial Advisory Group Pa. $2,219

Malcolm Makin Raymond James R.I. $1,304

Bud Kibler Merrill Private Wealth Management S.C. $6,851

Todd Nelson Merrill Lynch Wealth Management S.D. $2,452

Timothy Pagliara CapWealth Advisors Tenn. $1,278

Richard Szelc Neuberger Berman Texas $1,825

Dane Runia Merrill Private Wealth Management Utah $2,756

Tim Stotz Morgan Stanley Wealth Management Vt. $758

Stephan Cassaday Cassaday & Company Va. $3,064

Erik Morgan Freestone Capital Management Wash. $4,690

Christopher Hall Hall Financial Advisors W. Va. $854

Michael Klein Baird Wis. $12,381

Kevin Murphy Stifel Wyo. $507

Name Firm State Total Assets ($mil)

AN IMPROVING

STANDARD

OF CARE

BARRON’S SPECIAL SUPPLEMENT