This is an extended version of the profile that appeared in the May issue of Investment Advisor, part of AdvisorOne's Special Report profiling this year's members of the IA 25, the most influential people in and around the advisor universe. See the complete list and Special Report schedule for extended profiles of all the 2011 members of the IA 25.
“It’s Groundhog Day in the industry,” says Mark Tibergien, where “we are fundamentally dealing with a collection of small businesses who are continually conflicted between growing and managing their businesses, and growing and serving their clients.” As has been the case for years with independent advisors, the provision of advice, he says, “prevails over the fundamentals of building a true enterprise.”
Admitting that it’s a generalization, but one with more than a grain of truth, most advisors “can build a plan and work clients through the process, but the idea of applying that [same approach] to your business is abhorrent.” Tibergien, CEO of the RIA custodian firm Pershing Advisor Solutions, remains optimistic about the independent advice business, however. “The good news is that it’s a terrific business, and those enterprises that are built to endure through difficult environments and can achieve scale are in a great position to flourish.”
As far as trends go, in the short term, Tibergien thinks “we’re in a low organic growth environment, and the cost of talent is rising.” The need to differentiate is increasing, but in the longer term he wonders if the economics of the advice business—“the cost of delivering advice and implementing it is high in a market with a low rate of return”—raises the question “at what point does the advisor become disintermediated?” That suggests advisors must become more efficient. Moreover, "if you accept that there’s a physical limit to the number of clients you serve and the people you manage, at what point do you give up one or the other, because one or the other will suffer if you don’t?” This dynamic, he thinks, “will drive more specialization.”
Going back to the Groundhog Day allusion, Tibergien says “these are subjects that have been talked about for 30 years, but they’ve become more acute,” and that “it will be an interesting five years from now to see how many practices transform into businesses.”
As for the overarching issue of regulation, another evergreen issue for advisors that has become more acute lately, Tibergien says that “from our standpoint, it’s important that any regulation that comes out protects the client. It’s like the speed limit, which gives you guidance, but if you exceed it you get a ticket. But ultimately the responsibility for safe driving lies with the driver.”
Will there be more consolidation in the industry? “It has to happen,” he says. One reason is that “mortality is inevitable; the assets have to go somewhere, so either firms will grow in size to take on that asset movement, or firms will consolidate in order to provide continuity.” Practically speaking, "if you’ve operated as a solo advisor and you’re in your late 50s and you want to bring somebody on now, it’s too late. It will be more expedient to merge with somebody.” At Pershing, Tibergien says that “most of our advisors are pretty large, and they’re all exploring these tuck-ins,” referring to growing a practice by assuming the advisors, clients and assets of another advisor. But for those Pershing-affiliated RIAs, they see this approach as a “growth opportunity, not as an end-of-career” strategy.
Tibergien, who has been on the IA 25 list for all nine years of its existence, the only person with that honor, signs off with more of the hard-headed advice for which he’s famous. Advisors, he says, should “do for themselves what they’re doing for their clients. You impact how individuals behave on life choices,” and teach clients “that not everything is about the moment.” If those advisors can take their own medicine, he predicts, “we’re in for another long run of independent advice.”
Read more about the rest of the IA 25.
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