From the July 2008 issue of Investment Advisor • Subscribe!

Pershing Welcomes a Multitude

Bolstered by success of RIAs, the big B/D clearing and RIA custodial firm celebrates

By just about any measure, registered investment advisors are winning the battle, and maybe, just maybe, the whole war against the captive forces of the wirehouses. You can see it in the net new assets that are flooding into the RIA custodians' coffers while wirehouse assets are flat at best. You can see it in the number of brokers leaving the wire firms for the autonomy and opportunity for entrepreneurship that exists in the RIA world (helped, of course, by the rather difficult times being faced by people at Citigroup, Merrill, Bear Stearns, and Lehman Brothers, to name just a few). You can see it in the nearly wholehearted embrace of the fee business in those same troubled wire firms.

You can see it too in the slight swagger that the custodians are sporting these days, and in the most recent instance, of the bustling conferences with high-profile speakers (and their even higher speaking fees) to inform, motivate, and entertain.

That was certainly the case at the 10th annual Pershing Insite conference in Hollywood, Florida, in early June, where at the opening session chairman and CEO Rich Brueckner proclaimed that registrations were up 85% over the prior year. Some 2,000 people sat at Alan Greenspan's feet, chuckled at Democratic politico Paul Begala's wry yet touching reminiscences of life in the Clinton White House, and hundreds even bellowed a Beethoven tune in broken phonetic German after being rehearsed by Boston Philharmonic Conductor Benjamin Zander.

With its RIA business--Pershing Advisor Solutions--getting a serious shot in the arm with the hiring of Mark Tibergien last year, and its parent company's merger with Mellon Bank settling down, the conference had an ebullient air, though many of the presentations were deadly serious.

In a wide-ranging discussion on the markets and the economy on June 4, former Federal Reserve Board Chairman Alan Greenspan said that the top domestic issue facing the United States is finding a fix for the Medicare funding issue. Responding to a question from Pershing Managing Director Frank La Salla, who asked if we were headed toward an era of 1970's-style stagflation, Greenspan noted that after a long period of lower inflation and long-term interest rates "we're now heading in the opposite direction," and concluded that "unless we handle this is a thoughtful way--and this is a political issue--there is a risk of stagflation."

In an interview just before the conference, Tibergien, a long-time columnist for Investment Advisor, discussed the findings and implications of a Moss Adams study commissioned by Pershing on M&A activity among RIAs and presented at the conference by Philip Palaveev, himself now a Moss Adams alumni. "Our market is serving growth minded firms that serve sophisticated clients," he said in referring to Pershing Advisor Solutions. But Tibergien worries that to the extent that both independent broker/dealers and custodians "are focusing on the sellers of businesses rather than buyers, we put our own business models at risk, because the real future constituent will be the successor, or successor organization. That's why at PAS, he says, "we're really trying to pay attention to the second generation of advisor; to focus our practice management on the grooming and development of the next class who will be taking over as advisors and as managers of the business. It's hard to be thinking about this business in terms of people who are nearing retirement and expect them to change; we're making a connection to the next generation of advisors who appreciate our approach and our sympathy, and we present a viable choice to those who don't want to do business like it has been done in the past."

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