The Top 100 Independent Advisors

THE EPIC TRAVAILS OF BIG FINANCIAL INSTITUTIONS over the past year have been a windfall for America's small, independent investment advisors. With giants like Merrill Lynch taking huge hits to their reputations from the credit crisis, investors have been decamping to smaller outfits in large numbers. Advisors, too, have been jumping from the major Wall Street houses to independent outfits or hanging out their own shingles. Result: Some $200 billion flowed into the independents last year, bringing their total assets under management to about $2 trillion. Fully half of that new money moved from Street firms, says Tiburon Strategic Advisors, a California-based research firm.

The rise of the small fry is apparent in Barron's annual listing of the top 100 independent advisors, (see table, "Top 100"). The ranking, including both registered independent advisors, or RIAs, and advisors at boutique brokerages, features 41 new names and a new No. 1, Ric Edelman of Fairfax, Va. Many on the list credit their growth to transparency of operations and legal requirements for RIAs to put customers' interests first -- appealing features in these post-Madoff times. Advisors at Wall Street firms aren't required to live up to customer-first, or fiduciary, obligations, but that may be changing as Washington moves to bolster financial regulation (see "Relationship Rehab, Washington-Style").

Make no mistake: It isn't easy to compete against the giant financial concerns. Wall Street houses and regional brokerages still manage at least $5 trillion for individual investors, more than twice as much as the independents. These firms and their clients benefit from sophisticated technology and extensive regulatory compliance efforts -- strong bulwarks against fraud. Here, then, are snapshots of how five of the top 100 independents are rising to the challenge.

Financial Network Group
Cincinnati
Assets: $1 billion
Rank: 37

Bachrach figures that his financial-planning firm has just wrapped up the best six months of its 18-year history. "We used to get calls from three to five new clients a week; now we see that many call us every day," he says.

The stock market's roaring rally since March obviously hasn't hurt. But Bachrach, 57, says that's not the only factor. "I'm able to hire incredibly strong talent as other firms cut back," he asserts. What's more, his firm's small size and personal touch have been a magnet for investors shaken up by the market tumult of the past year. Bachrach's clients, he says, "can see and understand what it is I'm doing for them."

Bachrach, who began his career by designing local employment programs in Cincinnati, clearly knows how to put dollars to work, too. And he knows when to take them out. He began cutting portfolio exposure to the stock markets in early 2007, shielding his clients from some of the mayhem. "The new clients we are getting have gone through a process of wondering what it was that people who lost less did to accomplish that, and have thought more in depth about what risk really means," says Bachrach.

In his view, it means focusing less on beating an index -- or other investors -- and more on achieving set objectives. "You have to focus on doing well over the whole course of the financial plan," he says.

For now, that approach is taking Bachrach and his clients farther afield geographically than ever before.

"This century is likely to belong to someone else, not America," he explains. "You may be here, but your money may not, unless it's in those areas where an American company's ingenuity comes up with a solution to global problems."

He cites ExxonMobil's experiments in developing new biofuels from algae as an example. "Independent advisors can access all the best global managers these days," Bachrach adds.