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Three Cs of Future Advisor Success

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Together with Moss Adams, Pershing Advisor Solutions–the advisor custody arm of The Bank of New York Mellon–has released a new study called Fast Forward: The Advisor of the Future, which argues that ” the advisor of the future will be evaluated on “ three C’s”–change, capacity, and culture.

Change: The average RIA firm is expected to triple in size over the next five years, and in order to increase revenue and owner income, these firms need to be thoughtful when making hiring decisions, “stretching beyond the tendency to simply add more advisors.” The study also suggests that firm owners need to consider expanding their practices by creating more “sophisticated” organizational structures that include support functions, dedicated management positions, and specialists such as financial planning experts and tax professionals, since developing employees who can drive cultural change and enter leadership roles will help to boost retention, extend the span of control, and ensure succession when an owner decides to make a transition.

Capacity: Firms that have high productivity but no free capacity have struggled to grow, the study reveals. In fact, firms that reported the highest productivity in 2003 had a difficult time capturing the opportunity the market presented in 2004. Also, firms that grew very fast had excess capacity and lower productivity levels. “A firm that has aspirations to grow quickly has to maintain the capacity to do so at all times and be ready to capture opportunity when it presents itself,” the research reads.

Culture: The report points to rapid growth of an RIA firm creating a “cultural vacuum,” meaning a firm’s culture can be challenged by its ability to adapt to new organizational goals. In order to manage cultural change, the report suggests leading by example, defining success appropriately, articulating and communicating a set of shared values, and accepting and embracing new employees. “Founders will have to let go of some of their traditional responsibilities, but at the same time find a way to maintain a culture that fosters an intense focus on the client, maintains an entrepreneurial drive, and provides people with ample opportunity to reap individual reward,” it says.

“Consumer demand for independent registered investment advisory services will create tremendous growth in the coming years, however, clients will understand advisory services better and place greater demands on service,” said Mark Tibergien, managing director at Pershing Advisor Solutions, in a statement. “To capture market share during this period, independent registered investment advisors need to prepare for this growth opportunity by building more sophisticated organizations that can meet their clients’ elevated expectations.”

Moss Adams and Pershing have joined forces to help advisors prepare. Beginning November 29, 2007, the two firms will host 13 “regional consultative-oriented workshops,” using Fast Forward and a previous study, Uncharted Waters, highlighting the major findings from both and giving participants the opportunity to create a personalized scorecard, with analysis of where their firms rank compared to their peers across the three focus areas: culture, change, and capacity.


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