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).