Focus on the Optimal Client

“I think the leaders of investment firms don’t understand mortality tables,” joked Jim Ware, a CFA and consultant speaking at Pershing’s ninth annual Insite conference on June 6, about the tendency of those leaders to put off serious succession planning to their, and their employees’, detriment. That theme was picked up by Moss Adams principal and IA columnist Mark Tibergien in a separate session, in which he warned that many advisors were suffering from a “cultural lock-in” that leads them to believe that they can continue to achieve success operating as they always have. That’s a big mistake, Tibergien argued, because “boomers and their children are extraordinarily demanding,” and will begin to realize the power they have over advisors just as the demand for advice increases and as the number of advisors grows, but also as the talent pool for advisors remains small. To compete successfully in the future where the differences between broker/dealers and RIAs narrow, Tibergien told RIAs to “focus on the optimal client,” the 20% of an advisor’s clientele that brings in 80% of revenue, and build practices that accommodate the most talented advisors.