From the March 2011 issue of Investment Advisor • Subscribe!

March 1, 2011

Human Capitalist

At Pershing Advisor Solutions, the emphasis is on putting the right people in the right spots to serve high-end advisors

There’s plenty going on at Pershing Advisor Solutions, the RIA custody arm of Pershing, which is the clearing and custody arm for Bank of New York Mellon. Mark Tibergien, who joined PAS in October 2007 and whose fingerprints are all over the company now, likes to talk about the global reach of Pershing, which he says benefits advisors who want to trade on one of 30 different exchanges around the world, in that exchange’s local currency. Tibergien also talks about the features that are available already on NetX360, Pershing’s technology platform, such as one sign-on access to not only PAS assets, but also held-away assets. He’ll speak about the benefits of Pershing providing bank custody, not just brokerage custody, of client assets to its advisors through its BNY Mellon connection. He’ll talk about the importance attached to advisor customer service. He’ll relate the work Pershing has done with DTCC to make it possible for advisors to confidently custody alternative assets on the PAS platform.

In the end, though, it seems that what Tibergien has created at Pershing is a company that values people in its firm so much that it will make sure it puts the appropriate people in the right spots—Pershing veterans when appropriate, and new hires when that approach is called for. That’s not surprising, considering that Tibergien has been using his bully pulpit while at consulting firm Moss Adams (and in his long-time column for this magazine) to argue that advisors need to more effectively use their staffs to build better businesses, that older advisors who build succession plans for themselves and career paths for younger advisors will be more successful, and that the entire industry must find and cultivate thousands of new advisors in the few short years ahead if the industry is to continue to grow.

But in good Pershing fashion, this focus on human capital doesn’t just place those leaders in the right spot, it then measures their effectiveness. People, people, people. Measure, measure, measure. There’s one other thing: Pershing Advisor Solutions is a place where the people share a vision that emanates from Tibergien, but is clearly internalized.

Lest you think that PAS is one big love-fest, be aware that Mr. Tibergien and those same people have a competitive streak that leads them to point out, respectfully but forcefully, where PAS shimmers while Schwab Advisor Services, Fidelity Institutional and TD Ameritrade pale by comparison.

Forget imitation being the sincerest form of flattery (though this writer last year explored another custodian that is part of a major bank—RBC Advisor Services—which seemed to share an eerily similar business model with PAS). The most telling form of flattery may be raiding the competition’s executive ranks and placing them in positions of authority at PAS, as has been done with Jim Dario—whom Tibergien calls his most critical hire to date—and Kim Dellarocca, both formerly of Fidelity, in the relationship management and marketing areas. Or Natalie Wolfsen, formerly of Schwab, in product. Or Chris Child, also formerly of Schwab, and Evan LaHuta in customer service.

“If you can’t beat them,” says Tibergien with his trademark pithiness, “hire them.”

[Read about Tibergien's choice for head of product management and development.]

The State of Pershing Advisor Solutions
“The keys to engagement” in human capital at Pershing and, by extension, at advisory firms, “are putting people in the right jobs, and creating an environment where they’ll flourish,” Tibergien says. Such engagement, he argues, “creates a better employee, somebody who will look for continual improvement, and act like an owner of the business.”

So what is this business where the Pershing Advisor Solutions’ employees are encouraged to act like an owner? Tibergien says that when he joined PAS in October 2007, the firm had already made a commitment to serving wealth managers and that it had an opportunity to be a “world-class custodian” but in a different way than its “dominant” competitors. So he began by assessing the “great talent” he had at Pershing, but who were “not aligned right; not in the right leadership positions.” To begin, he placed Pershing veteran Karen Novak as COO, and Ron Canty as director of operations.

[Read more about Karen Novak.]

About a year into his tenure, Tibergien hired Jim Dario from Fidelity, who he says has brought “real professionalism” to relationship management and business development. He then mentions the hiring of Natalie Wolfson from Schwab to be head of product development, and a total of 19 customer service staffers from Schwab’s Lake Mary, Fla., facility, including Chris Child to run PAS customer service which, he says, “wasn’t bad, but was inconsistent.”  Hearkening back to the people-plus-measurement ethos referenced above, Tibergien can now boast that in customer service, “we measure everything that moves—promptness of returning calls, and with helpful answers; our customer service scores have made dramatic improvements.”

[Read more about Child and customer service.]

He then discusses Pershing’s technology investments that led to the rollout last year of the NetX360 technology platform, on which he said 500 programmers worked and on which enhancements continue to be made.

[Read more about Lucille Mayer and Pershing’s technology offerings.]

“People, technology, product, service and practice management—which most people expected I’d have some influence on”—says Tibergien, were, and are, the focuses at PAS. As for practice management, Tibergien says it’s one thing to have good ideas, and another to implement those ideas. So to help its affiliated RIAs “actually execute on the ideas they got from their custodians,” PAS decided to “concentrate on a couple of areas” where advisory firms need particular help: growth, human capital, operating efficiency and risk management. “We took a disciplined approach,” to those areas, he says.

The firm also took a disciplined approach to fashioning its own competitive positioning. To do so, Pershing addressed four major questions, Tibergien says.

1. What are the market trends? That is, “What’s happening in the RIA world that could inform how we build a new-model custodian?”

2. Accepting that there is material change going on both within the advisor community and in the environment in which they ply their trade, then, “Who is our optimal advisor to work with? What will they be addressing, or need to address?”

3. Which firms is Pershing competing with “for our optimal advisor?” Tibergien says “we knew we didn’t want to out-Schwab Schwab by being a big-box retailer. We’re a pure B-to-B organization, so going retail was not worth considering.” Neither was Pershing interested in “attempting to replicate TD Ameritrade by focusing on the smaller advisor.” Instead, Pershing defined its optimal client as having three key characteristics: committed to growth; committed to running their businesses professionally, even to the point of having professional management—“what we were offering would not be appreciated by those not professionally run;” and advisors who were serving clients with complex financial lives, beyond the mutual fund-ETF capability. What makes a difference? “Our global capability, our fixed income trading, what we were doing around alternatives.”

4. What is our shareholders’ definition of success? Referring to both Pershing and BNY Mellon, a priority of top management, Tibergien says, is that “we become one company that our clients worldwide will appreciate.”

Dario says that “our competitors are good at leveraging their strengths in retail,” but “we’re institutional,” saying Pershing’s focus is on the top 3,000 RIA firms out of the total 15,000 firms in the advisory universe. “Our intent is to be dominant among those 3,000.” The demise of Bear Stearns and the troubles with the wirehouses of the past few years means that “no longer will clients put all their eggs” in one custodial basket, and that “what gives us a leg up” among advisors seeking dual custodial relationships is “our strong counterparty risk” position as part of Bank of New York Mellon.

In addition to its business priorities, Tibergien points out that Pershing is very much involved in its hometown community of Jersey City, N.J., where, despite the waterfront high-rise office buildings populated by a number of financial services firms, poverty remains a reality for many residents. As part of its “huge effort in community involvement,” Tibergien points out Pershing’s big intern program for local high-school kids in Jersey City. “It’s not just a job,” he says of Pershing’s local programs, “but a commitment to the community.”

By the Numbers
So how well are Pershing’s people executing this commitment to service, product, technology and practice management?

One way is to look at the sheer numbers.

At year-end 2007, Pershing Advisor Solutions had 485 advisory firm relationships and $70 billion in client assets. The assets under custody dipped to $60 billion during the recession in year-end 2008 from 515 RIA firms, recovered to $72 billion from 550 firms at the end of 2009, and at year-end 2010 had 620 advisory firms custodying $85 billion in assets. Another interesting statistic: There were 30 breakaway broker firms that signed up with PAS in 2010, bringing $4.8 billion in assets.

Dario, the former Fidelity executive who runs relationship management, says we “start with the end client; we are extensions of the advisor,” which requires flexibility, but through a disciplined system in which “we measure not what we see, but how advisors see us” performing.

The RIA firms that work with Pershing have to be committed to running a professionally managed firm, says Kim Dellarocca, director of segment marketing and practice management, noting that research by Pershing and others has shown that advisory firms that have a chief operating officer are more successful. In working on business development with firms, Dario says the first question he asks is whether they have a business plan. While many do already, “if not, we work with them to write a plan,” he says, in addition to creating a client development plan. “We focus on the operations managers,” says Dellarocca.

To demonstrate the quality of the relationship managers who work with Pershing advisors, Dario brings up Ann Smith, who Pershing hired last year as director, relationship management after the advisor firm she co-founded was sold. “That’s the kind of person we want as relationship managers; she’s dealt with the same issues our advisors are dealing with,” noting in passing that the kind of practice management consulting PAS provides, which includes not only operational direction, but marketing suggestions as well, down to the level of recommendations on proper signage at an individual firm’s office—would be “expensive if it were coming from an outside firm.”

Dario says that “if we help our clients grow, we’ll grow,” while Dellarocca says that “at our core, we need to earn advisors’ business every day.” Tibergien argues that “one of our advantages in being a business-to-business organization is that we can truly empathize with the challenges advisors face.” At Pershing, he says, “we get it.”

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