Perfecting the Business of Advice

What are the characteristics of the most successful advisor firms? They have a clear vision and positioning; they are structured to grow in light of their strategy; their human capital is aligned with that vision; they have a compensation plan that reinforces their strategy; they have a conscious attitude about profit management, actively managing to profitability; they have a built-in leverage and capacity and have reduced their firm’s dependency on them for growth; they have a systematic process for gathering client feedback; and they consistently measure and monitor their firm’s operating performance. Oh, one more thing—they know “which levers to push” to achieve their goals.

Those thoughts are not mine, but Mark Tibergien’s and Rebecca Pomering’s, who last month published a “60% new” version of their 2005 practice management bible, “Practice Made Perfect.” The 2011 version is called “Practice Made More Perfect,” was published by Bloomberg Press and is available through Amazon.com and BarnesAndNoble.com. The new book reflects, said Tibergien in an interview, both the changes in the advisory world and the changes experienced by its authors over the past six years. Speaking in mid-August at the Jersey City headquarters of Pershing Advisor Solutions, which Tibergien joined as CEO in 2007, the former Moss Adams consultant and (disclosure alert) columnist for Investment Advisor spoke in his trademark deadpan yet forcefully authoritative way about the challenges faced by advisors of all kinds, and detailed his and Ms. Pomering’s prescriptions for curing what ails advisors now and will challenge them in the future.

Jamie Green: What has changed since you wrote the book, and what prompted you to write it?

Mark Tibergien: Rebecca (Pomering) and I have a missionary zeal; we can’t keep our mouths shut. She’s a CEO (of Moss Adam’s RIA firm, Moss Adams Wealth Advisors) and I’m a CEO, which has given both of us a whole new perspective. And many of the assumptions (in the original book) have changed: Firms are bigger, advisors are older; the way that people manage has changed; many firms have multiple locations; and we’ve seen the rise of outside passive investors and consolidators. Sixty percent of the book is totally new, and we rewrote [the whole book].

Many advisors are process-oriented in their craft, but not in how they run their business. The bull market hides a lot of sins, and in 2008–2009, many advisors realized they had gotten soft and had to redefine themselves and retrench.

In the book, we put so much emphasis on workflow. You can’t grow without discipline and process. The big banks showed us during the crisis that unmanaged growth is worse than no growth. As a custodian, every week we see where a lack of processes puts advisors and clients at risk. It’s not all about risk management, however, but growth management.

I had another motivation, a business reason to do this. Pershing is a business-to-business custodian; our competitors are interested in the mass market, while our clients tend to be more process-oriented businesses.

JG: So do you need to be a big firm to grow? Aren’t most advisory firms small?

MT: I have no problems with solo practitioners. If mediocrity is your goal, that’s easy to attain. It’s your call, just be good at it. But providing financial advice is not one dimensional: It’s not just advice, but running a business. Another lesson of the crisis from the big companies is that people don’t have to be criminally minded to do the wrong thing. And remember, small doesn’t mean peace of mind, but one size doesn’t fit all. In business there are rules. My message is more about how to achieve greater fulfillment by instituting these disciplines.

Regardless of size, you need to ask yourself, what business are you in? Who do you serve? What’s the impact you have? How do you define success? And are you fulfilled?

Our message is meant for those who want to take their firms to the next level. We’re providing a roadmap to create real enterprises, [showing how to] start applying real management discipline.

JG: You mentioned the changes that have occurred since you and Rebecca wrote “Practice Made Perfect.” Where is the industry now?