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May 06, 2011 at 08:00 PM
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.”
