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Replacements Without a Clue

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This past May, Moss Adams LLP dropped a widely reported bombshell on the independent advisory community by announcing that the Seattle accounting firm is phasing out its practice management consulting. A true market dominator in the advisory world since 1994 when it bought Mark Tibergien’s consulting firm, Moss Adams has epitomized practice consulting the way Schwab Institutional does custodians, Advent business software, and Morningstar mutual fund information. Although I’ve worked with Mark and Moss Adams in the past, I don’t believe it’s biased of me to say that the loss of its presence in the industry will be felt for many years to come.

Even though we didn’t know it at the time, the death knell for Moss Adams’s consulting efforts was the announcement last Fall that Tibergien was leaving to become CEO of high-end RIA custodian Pershing Advisor Services. I’ve known Mark since he was on the IAFP (a forerunner of the FPA) board in the mid-’80s when, as a small business owner himself, he launched a career as a consultant to independent advisors by talking with as many advisors as he could about their practices and the challenges they faced. It’s no exaggeration to say that over the years, he’s talked to thousands of advisors. Along the way, he virtually single-handedly shepherded the fledgling independent advisory industry from a collection of self-employed folks with moderately paying jobs into a category of businesses, many of which are now worth well into seven figures (see the December 12, 2007 installment of my IA blog).

When Mark sold his firm to Moss Adams a decade later, it became the dominant force in advisor consulting overnight. Then, it used its financial muscle to expand the brand by adding the industry-defining Financial Performance and Compensation and Staffing Studies, which have come out in alternate years since the late 1990s. Moss Adams also hired Mark some top-notch help in human resources maven Rebecca Pomering and data guru Philip Palaveev, both of whom eventually joined Mark as partners in the accounting firm.

Breaking Up a Dream Team

But despite the success of the consulting division (which has seemingly done work for every major independent firm in the country at one time or another), and their expansion of the brand beyond Mark himself, when Mark left, so did the heart of the business. Faced with the daunting task of filling Tibergien’s Shaquille O’Neal-size shoes on top of their already nomadic traveling schedules, Pomering and Palaveev decided to call it quits–even though they apparently were given the option to take the consulting division outside of Moss Adams. “We both have small children,” says Pomering, “and despite the tremendous opportunity, Philip and I decided we just didn’t want to travel that much anymore.”

So Rebecca Pomering moved over to head Moss Adams’s own wealth advisory firm, and Philip Palaveev joined practice consolidator Fusion Advisor Network. Their families’ gain is the industry’s loss. Rather than rebuild the industry icon from within or with outside help, the Moss Adams accountants decided to simply close the doors on the advisor consulting side of the business. What still isn’t clear at the time of this writing is the fate of the research division, which produces the Moss Adams Studies under the direction of Palaveev but mostly with the sweat of former Frank Russell analyst Dan Inveen and his team. [Disclosure: Investment Advisor has for several years teamed with Moss Adams to encourage its readers to fill out the survey, has written and commissioned articles on the Studies, and partners with Moss Adams on a yearly Advisor Summit--this year on Dec. 2-3, at which the findings of the Studies are presented.] Pomering said the firm intends to publish the 2008 Study under Inveen’s capable oversight, but after that it’s not clear what will happen to the annual data that has tracked the growth and documented the success of the advisory industry for more than ten years.

Pomering did say that Moss Adams was exploring the viability of a strategic partner to continue the Studies in subsequent years, which raises troubling questions, at least in my mind. Having written a feature based on the Studies for Moss Adams for a number of years, and worked on the Study itself in 2006, I’m not entirely an impartial observer of its impact on the advisory world. Yet, every year without fail–before, during, and after my association with Moss Adams–I analyzed the Studies from cover to cover as soon as they came off the press. So did countless advisors, who use the Moss Adams data to benchmark their firms, compare their margins and ratios, tweak their compensation packages, and learn what the best firms do that makes them more successful than their peers.


That’s not to say that the Moss Adams Studies didn’t have their flaws. I’ve tended to agree with the critics who felt the Studies were skewed toward larger practices as evidenced, for instance, by the assertion in the 2007 Compensation and Staffing Study that the average advisory practiced generated some $1.6 million in revenues in 2006. There’s no question that advisory firms across the board are much more successful than they were just five years ago, but you don’t have to spend much time talking to advisors around the country to know that the “average” practice didn’t bring in a million and half dollars.

Of course, it’s completely understandable that the Moss Adams data would be skewed toward the larger firms: after all, that’s the target market for their consulting services, which were priced out of reach for the vast majority of “average” advisors. What’s more, as participation in the Studies is voluntary, one could expect that the more successful firms would be most eager to hang out their operational laundry and share their performance figures with the world.

I’ve also been troubled (and shared my concerns with the Moss Adams folks) with their practice of allowing each firm to define the category of its services (see Name Game sidebar, below).

But those criticisms are really short strokes compared to the contributions that the Moss Adams Studies have made to understanding the business challenges of and successfully building independent advisory practices. What are typical revenues for a practice with five employees? How are firms usually staffed? What’s a good profit margin? How much do expenses usually run? Where do advisory firms typically level off, and what do successful firms do to break through those barriers to the next level? These and many others like them are the questions Moss Adams defined and answered each year to help advisors (who often have no business training) to manage their businesses as well as they manage their clients. While there are some pretenders, in my view anyway, in the industry who claim to do the same thing, no other collection of data comes close to providing the depth of analysis and insight that Mark Tibergien and his team at Moss Adams have done year after year.


So the big question on the table is what’s going to happen to one of the industry’s most valuable resources? As Moss Adams searches for a strategic partner to take over the Studies, let’s hope they learned a lesson from the FPA’s experience. Ending its relationship with the Moss Adams Studies in 2005 for reasons that still escape me (apparently just another blunder in the Association’s long line of boneheaded business decisions), the FPA replaced Moss Adams with Chicago-based compensation consultant McLagan. Now there’s nothing wrong with McLagan per se; they’ve been consultants to the financial services industry for over 40 years.

In fact, according to a recent press release: “McLagan’s over 500 clients include every major financial institution in Securities, Asset Management, Banking, Credit Cards, and Mortgages.”

Impressive, indeed. Well, except for the minor fact that the firm has no knowledge or experience with independent advisory firms. None. Zero. Nada. As Todd Crowley, McLagan’s head of broker productivity and compensation, and the executive in charge of the FPA/McLagan Scorecard, candidly told me: “No, it’s true that we haven’t worked with independent firms before, but we’re learning with every Scorecard, and we believe we can piggy-back on the data we do have from brokerage firms. There are certain things in common across channels.” Of course, a skeptic might wonder how one would know, without a working knowledge of independent firms, what they had “in common with other channels,” I guess there’s nothing like on-the-job training.

Not All Research Is the Same

But don’t take my word for what McLagan doesn’t know. Here are the “highlights” released from their latest Report: The owners of “highly efficient” multi-advisor practices have 31% higher owner comp, 51% larger clients, and 18% more fee compensation. No kidding? This is just a guess, but maybe that’s what made them more “efficient” in the first place? This isn’t exactly the kind of penetrating analysis that will make you forget about Moss Adams.

Still, the biggest drawback to McLagan is that their “data” is shared with participating firms via a “benchmark,” while the “report” written from the data apparently isn’t really a report and isn’t available to advisors at all. “At the risk of downplaying the report,” said Crowley, “it’s more of a white paper that went to executives and wasn’t really meant for advisors at all.” So the FPA’s solution to replacing Moss Adams is benchmarking advisors using broker data, and a white paper for B/D executives (which may help McLagan’s business, but it’s hard to see how all this benefits either the FPA or its members or the industry as whole.) Brilliant.

Let’s hope the advisor community does better than the FPA at replacing the Moss Adams Studies. The problem is two fold: It’s becoming clear that rather than just being an interchangeable, replaceable consultant, Mark Tibergien was one of those rare breeds who combined honest-to-goodness business savvy with an intimate knowledge of and a passion for independent advice. The likelihood that we’ll replace him and his team of like-minded folks anytime soon is sadly small.

At the same time, the growing success of the independent advisory industry is putting it on the radar screens of the rest of the financial services industry. Which means the next onslaught that advisors will face (and are already beginning to wrestle with) will be the carpetbaggers from the brokerage world coming to “help” their independent brethren, without a clue how independent advisors are different, or why they have become the fastest growing segment of the financial services universe. I suppose it’s a fitting tribute to Mark Tibergien, Rebecca Pomering, Philip Palaveev, and Moss Adams that they may prove impossible to replace.

Bob Clark, former editor of this magazine, surveys the advisory landscape from his home in Santa Fe, New Mexico. He can be reached at [email protected].


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