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3 Advisor Business Models of the Future: Cambridge Research

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“Our New Century Council, a group of advisors age 45 and under, are currently looking to identify what the business model of the future will look like in 2025.”

No small order, but one Fairfield, Iowa-based Cambridge Investment Research is willing to take on.

“The reason we’re doing it is that we want to make sure our advisors and clients today, as well as the next generation, have the tools and resources they need,” Jeff Vivacqua, the firm’s first vice president of business strategy, explained. “It might be e-signature technology or money management platforms or whatever.”

New Century Council members convened at Fidelity’s offices in Boston last April, he related, noting “we didn’t want it to just be about technology, but about the overall business model as well.”

The group began the laborious task with a flowchart featuring clients at the top, all the different business models on the next level, the reps and advisors below that, Cambridge as the penultimate layer and finally “next steps” as the bottom outflow.

“The group discussed the individual rep model, how client relationships will be characterized, technology and the systems that will need to be developed (at both the advisor and client levels), as well as a number of other issues.”

From these, he added, three business models were identified:

  1. Family specialty office—one office, with each advisor specializing in a particular skillset.
  2. Team approach—A number of advisors will come together—a type of ensemble firm—that leverage each other, but none have one, particular skillset.
  3. Open or virtual team—Advisors will want to work together because each has a defined specialty that compliments the other, but one might be in Houston and the other in Philadelphia. Technology, obviously, is making it easier for each to work with the other remotely, or “virtually.”

“How do we now define what these three business models will need for the future? Those are the next steps at the bottom of the flowchart.”

Whether these business models exist in the wirehouse, broker-dealer or the RIA, where will Cambridge fall in the mix?

“Eric [Schwartz, Cambridge’s chairman and CEO] likes to point to the right, the left and somewhere in the middle,” Vivacqua answered. “That’s where Cambridge does and will exist, somewhere in the middle.”

He added that firms “have to consider the rep needs, the marketplace needs and then what the firm is capable of producing. A combination of all three drives intellectual change.”

Succession and next-gen issues are also major themes for council members. Obviously, the question is where firms will find successors and the next generation, but Vivacqua argued, it’s more than that.

“Some say the roles are shrinking, but it’s only because the next generation of advisors isn’t coming from traditional sources.”

Wherever they come from, he concluded that Cambridge feels a “residency-type approach” is what’s needed.

“Studies show that the more acclimated a younger rep gets to the client relationship, the more successful they will be. Doctors immediately start medical students on the interaction with patients—their bedside manner—and our belief is that same type of internship is needed. So now I will connect those dots and say that will impact your business just as much as any technology will.”


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