Exclusive: Morgan Stanley Suspends Participation in Forbes/Shook Rankings

Morgan Stanley Wealth Management has halted its relationship with Forbes and Shook Research’s advisor rankings following a report of an undisclosed $6 million payment between R.J. Shook and Forbes’ former top editor. “After careful consideration, we have decided that Morgan Stanley Wealth Management will suspend participation in Forbes | Shook Research industry recognition, including their advisor rankings and conferences,” Morgan Stanley Wealth Chief Operating Officer of Field Management Barry Krouk wrote in a memo sent to advisors on Thursday. The decision represents a significant setback for the high-profile rankings program that heavily featured Morgan Stanley brokers. This year, 64 of the wirehouse’s advisors made Forbes’ Top 250 list, representing more than 25% of honorees, including four of the top 10. The Best-In-State rankings included more than 2,000 individual Morgan Stanley advisors and more than 1,400 teams. Krouk’s memo acknowledged that advisors relied on Forbes’ conferences and rankings for professional development and marketing their practices. He wrote that Morgan Stanley would soon provide an opportunity to leverage “alternative digital marketing resources.” The wirehouse appears to be the first major firm to distance itself from the rankings after The New York Times reported last week that Shook had personally paid former Forbes editor Randall Lane following the sale of Shook Research last year to private equity firm PPC Enterprises. Morgan Stanley’s decision may reflect concerns that the nature of the payment remained unclear. The memo did not specify what conditions would have to be met before it could resume participation. As of Friday morning, advisor websites still noted the recognition, although sources expected references to be removed. “As the Firm continues to monitor the situation, we remain focused on ensuring that the organizations with whom we partner uphold the high standards of integrity and transparency that are essential to Morgan Stanley and its clients,” Krouk wrote. A spokesperson for Morgan Stanley, one of the largest wealth firms with almost $6.3 trillion in advisor-managed assets, confirmed the memo in a statement: “In light of the news, Morgan Stanley Wealth Management has elected to suspend its relationship with Shook Research.” A spokesperson for Shook Research said in a statement that it is “disappointed by the decision given the long-term relationship we have shared with Morgan Stanley and its advisors.” “None of the recent news relates to the methodology or integrity of our research or rankings,” the spokesperson added. “We hope continued dialogue will afford us the opportunity to resume our relationship and allow Morgan Stanley’s elite advisors to continue to benefit from the important validation, recognition, and growth opportunities our rankings have long provided.” Shook Research’s Chief Executive Officer, Molly Bennard, had sought to reassure advisors in a separate memo sent to industry participants last week. She wrote that the payment to Lane was personal and that “outside counsel” examined the issue “extensively and found no evidence that it had any relationship with the rankings process.” Neither Lane nor Forbes were involved in Shook Research’s rankings methodology, according to the Shook Research memo. The company noted that Shook and his wife, Liz Shook, stepped down from their roles in the company in June “for reasons unrelated to this matter.” A spokesperson for Forbes did not immediately return a request for comment. Shook dedicates a page of its website to the quantitative and qualitative methodology it uses for selecting advisors. The Securities and Exchange Commission’s marketing rule for investment advisors permits wealth managers to tout external ratings, but they must be able to demonstrate a “reasonable basis” for concluding that the underlying methodology was impartial. Spokespeople for other wirehouses, including UBS Wealth Management USA, Merrill Lynch, did not immediately return requests for comment on whether they have re-evaluated their marketing of Forbes/Shook rankings. A Wells Fargo spokesperson declined to comment. Despite its broad participation, the industry has had a longstanding skepticism toward advisor rankings. A senior executive at another national wealth firm said that the company declined to participate financially in Shook-related events and believed its advisors, many of whom had been hired from Morgan Stanley and other wirehouses, received less recognition as a result. [Editor’s Note: AdvisorHub publishes its own annual advisor rankings. Advisors do not pay to participate.] The Forbes, Shook, Barron’s etc rankings have lost their shine …. The vast majority of folks recognized either A) Inherited the business, especially the next gens and B) their firm paid to have X number represented – they mean nothing and glad to See MS taking the lead (yet again) The majority of the advisors on all of those lists inherited their book via Alfa etc and then go on to market as if they are self made. Meanwhile the most pristine prod guys at GS and other top tier firms, Ria don’t self promote and do far more revenue and assets Figuring out this whole scheme isn’t tough. The expanded number of rankings from the original top 1000 list is where the gravy train started. Shook/Forbes knew they had to rank the best producing, high-profile teams high because if they didn’t, everyone would know it was a sham. Many of those teams never paid for any of the features, awards and seminars, but they were too big and well-known inside each firm to not be included. The trick was to create dozens of lists featuring thousands of teams. You still had the obvious, well-known teams at the top, but the next 80% of every list was impacted by how much teams spent on advertising, recognition material, seminar participation,etc. Forbes would tell Shook which teams were spending all the money and they would take that info and move teams up and down the lists because those teams weren’t well known and no one would really pay attention. Then they would split all the profits. Actually a brilliant marketing strategy because all the firms were too wrapped up in the whole thing and scared to jump off. Thank you Morgan Stanley for being the first. Hope all the rest of the sheep will follow. LinkedIn will never be the same. Sunlight is said to be the best of disinfectants Mr. Cosby is going to love this #Darvo&associates Nobody pays $6 million to someone not related to them “just “cause.” No amount of legal “clearance” you present will change what was an obvious payoff. The fact that they’re all gone for “unrelated reasons” tells you all you need to know. Please stop treating us like idiots. Time is up on your pay to play scheme. The stench of Dean Witter remains What would the payoff be for? I don’t believe the system was flawed because of inherited books, the system is flawed at both Forbes and Barrons (which Shook researched used to be affiliated with) because aum is materially inflated on the rankings. Advisors used outside assets and net worth and include it in their advisory numbers or have small relationship with a wealthy family or institution such as a 401k and bundle all the assets. Additionally there is no critical analysis of the advisors ethics or return on assets. Many highly ranked advisors have had significant legal issues over the years. Why would any advisor feel the need to attend a summit for ether Barrons or Forbes? It is all ego and marketing. The worst is when advisors think they are so important that they should write a book and then say it is a best selling book. Become a trusted advisor to your clients and you will get referrals, don’t pander to be on a meaningless list and please please never write a book. When Shook re-rates advisors each year – are you naive enough to think there isn’t a checkmark category for “buys licensed” plaques and adverting and “attends conferences” – each of which provide kickback payouts to Shook? Do you think this doesn’t raise their status/ratings with Shook? At the top of the lists it clearly says “Presented by Merrill a Bank of America company”. Wonder how much that costs? Surely that doesn’t influence the rankings….. Oh my. So many RIA’s with so much to say. I was on the list. I didn’t inherit my book. I didn’t buy any plaques or attend conferences. I was ranked for many years and moved up as my business grew. My AUM was accurately reflected. No legal issues. Yes, certainly something isn’t right with a 6M payola. Oh well, it was fun while it lasted. At least there is Barrons. I guess MS is leading, again, in distancing themselves And for the last comment that BofA sponsoring influenced rankings, clearly didn’t read the rankings. That theory could have been plausible if MS sponsored. But they didn’t…and their advisors still dominated the lists, justifiably so. Does anyone actually believe that RJ stepped down for “unrelated matters” one month before this news hit?