Analyzing Your ADV: A Closer Examination

Written by: Matthew Jarvis

One of the many things Micah likes to tease me about is that every time we meet and/or hear about another financial advisor, I immediately go to the SEC/FINRA sites to pull their ADV. Why? Because I want to know if their practice matches the stories they are telling. Obviously, the information on their ADV is limited (and I’m especially frustrated to discover that they are part of a major firm that obscures their data); for independent advisors, I can see their AUM, fee schedule, staffing, and some basic client data. Hardly have a perfect pulse on their practice, but it gets me close to knowing if this is a person I should listen closely to or just politely smile and nod.

Why is this so important?

One of the rules of success is to do what works, and the counter to that could be: ignore what doesn’t work.

Put less delicately; I only want to take advice from advisors who have a higher level of success than me. At this stage in my career, with some $240M of AUM, a 7-figure EBOC, and more than six months of vacation annually, I don’t want to hear the ‘great ideas’ from an advisor with a practice that enjoys only a fraction of my success.

YES, I KNOW there are expectations to this. For example, I closely follow the work of Benjamin Brandt, whose practice is much smaller than mine, BUT Ben is one of the top podcasters in our industry and is incredibly intentional with his time. He is also a super awesome guy who runs an incredible mastermind, but I digress.

However, the rule is that if your ideas were so great, your ADV would reflect them. On the opposite end of the spectrum of Ben are the dozens of self-proclaimed experts (some advisors, some not) who have practices that are barely surviving, or worse yet, no practice at all. These are still lovely people but not a source of proven ideas.

Even putting myself on this spectrum, I have no business offering advice to Ron Carson, whose RIA raises more assets each year than I manage in total. WHY? Because while I might have lots of great ideas for Ron, I have NO experience playing at that level.

If it sounds like I’m ranting (and I wrote an entire chapter on this in my book), it’s because I still have deep emotional/financial wounds from trusting the advice of people early in my career who had no business giving advice. More times than I care to admit, I tried to implement their ‘great ideas’ only to discover, at my own expense, that their ideas were totally untested.

So what does this all mean for YOU and YOUR practice?

  • BEFORE getting excited about a great idea, make sure the person presenting the idea actually HAS the kind of practice you want.
  • BEFORE giving someone else advice about their practice, make sure you’re not the one speaking out of turn. My personal favorite on this was every time an advisor or web developer would criticize Micah’s site, only to discover that while it’s not the prettiest website in the world, it Delivers Massive Value to his target audience and his practice.
  • SURROUND yourself with people who have some version of what you want. Reading this blog is a great start.

Related: Consistent Value Delivery: A Challenge for Advisors Every Quarter