If there was any question that Mark Tibergien might go corporate, his prepared and off-the-cuff comments delivered at the second annual Investment Advisor-Moss Adams Advisor Summit disabused the 200 attendees of the notion.
At turns warning advisors of over-confidence–”the seeds of destruction are sown in good times”–while cajoling them to think and plan ahead–”invest ahead of the curve” in both technology and new people–Tibergien kicked off the day-and-a-half meeting on November 27 in Arlington, Virginia, with a standing-room only keynote and stayed around to not only gladhand attendees at breaks but give some pointed advice in a later session to advisor Mike Patton on how to jump-start his new practice.
Hewing closely to the theme of the conference–how to optimize firm growth by recruiting, hiring, and compensating the best employees and partners–the new head of Pershing Advisor Solutions exhibited his trademark command of the research numbers honed through his years at Moss Adams paired with the provision of personalized consulting advice that he has delivered to individual firms and now those that custody their client assets at the Bank of New York unit. High on the list of “The 10 Big Things Advisors Should Think About,” (reprised in his column this month on page 61) Tibergien suggested, is dealing with the “acute” talent shortage in the industry, and learning to live with a generation of employees whose expectations are different than the founders’. “The next generation will always be different,” he warned the many veterans in the audience, observed that “most founders have a death grip on their practices,” and suggested that owners “need at least three people in your firm as potential successors.” As for motivating those potential successors, he reminded attendees that “compensation drives behavior,” and counseled that “the more business you bring in, the more variable your compensation should be.” By contrast, “the more your job involves service, the more fixed your compensation should be.” He urged advisors to clean up their “muddled” pricing strategies to “better communicate the value of the offering” they are providing, and presented research showing that many advisors will be moving toward a retainer/relationship fee and away from fees based on AUM.
Regardless of your pricing structure, however, Tibergien argued that differentiation among advisors is more important than ever, “because everyone looks and sounds like anyone else–I can’t tell the difference between the UBS Web site and yours.” Moreover, that clearly stated differentiation is important for more than just attracting prospects and retaining clients. “What compels me to come to your business and stay? It’s the same for talent–for employees–as it is for clients.”
Rebecca Pomering of Moss Adams picked up the people theme in her session, in which she noted that the “wealth management model is more labor intensive than the investment management model.” Presenting key findings from the 2007 Moss Adams Compensation and Staffing Study, Pomering said the rapid growth of the industry has led to an intense competition for talent, with equity as the ultimate prize. Firms in the Study expected big jumps in hiring for professionals and technical specialists in 2007, and from 2004-2006, firms reported median compensation for COOs and lead advisors had risen 72% and 41%, respectively. In hiring, Pomering suggested firms should first “define the jobs, then find the right person to fill the job,” and that firm owners should “focus as much on recruiting and keeping good people as you do on prospecting and keeping good clients.” On compensation, “start by deciding how you want people to behave, then build a compensation plan to encourage that behavior.”
In a joint presentation by Moss Adams’s Philip Palaveev and Tom Giachetti of Stark & Stark, the issue of partnerships was explored. Looking at the evolution of advisory firms, Palaveev suggested that the first generation of a firm are the entrepreneurs, the second are managers, while the third generation are technicians (he jokingly wondered if the fourth generation would be bureaucrats). Owners need partners, Palaveev pointed out, to help retain the best employees, to give those employees pride and control of ownership, and align their interests.
The End Game
One of the most compelling of the Summit gatherings was the penultimate session in which IA gadfly-at-large Bob Clark probed the experiences of the leaders of three advisory firms who had taken the ultimate step in succession planning: selling their practices to another firm. Dave Huber of Huber Financial in Chicago sold his firm just months ago to Mesa Financial of Minneapolis; Dwayne Grady’s Cornerstone Wealth Strategies Group in Bethesda, Maryland, is now a division of United Capital Financial Advisers; and Greg Sullivan’s firm–Sullivan, Bruyette, Speros & Blayney in McLean, Virginia–became a division of Harris Bank several years ago. The reasons for selling were different for each advisor, as were their post-sale experiences, but each counseled that such deals should be done in leisure, with plenty of due diligence on both sides, and that an exit clause should be included for the advisory firm if the acquiring firm should itself have a change of ownership.
Each expressed satisfaction with the outcome, and saw the transactions as one way to ensure the continuance of their firms and of service to their clients, while helping solve their personal “people” problems.