A panel comprising four members of Pershing’s advisor-focused brain trust took to a New York stage Monday afternoon in a Discover 2014 session that addressed a wide range of topics, from the shrinking broker-dealer ranks to robo-advisors to which advisors (and their partners) will thrive next year and beyond.
Mark Tibergien, CEO of Pershing Advisor Solutions, urged the mostly broker-dealer attendees to address three major issues — the capacity to sustain growth, their “relevance to consumers and continuity,” including dealing with the advisor talent shortage, and the succession planning issue.
“This is a business created by boomers for boomers; that has to change,” urged Tibergien. Instead, he encouraged his listeners to ask themselves, “which business are you in? If your strategy is still relevant, that should inform your structure, the people you hire and your compensation methods.”
As for success in the future, Tibergien said advisors should prepare by first asking themselves “How old will you be 10 years from now? What will your clients look like 10 years from now?”
There are “two kinds of leaders,” he said, “those who live in the past and complain about the present, and those who see opportunities” in the present and align their firms to take advantage of those opportunities.
Successful advisory firms — those who know what business they’re in and demonstrate their value to clients — have also been able to raise their fees, he reported. “The top-performing firms have raised fees over the past few years,” charging a fee for service in addition to fees for managing assets.
(Tibergien is a regular columnist for Investment Advisor.)
John Brett, a Pershing managing director and former Merrill Lynch executive, cited two big trends. In the retirement planning space, he said “the biggest challenge is sequence of returns” in retirement, crediting Moshe Milevsky’s pioneering work on that issue at York University in Toronto.
Brett also encouraged advisors to better prepare for the future by ensuring that their technology matches their clients’ expectations and needs: “Does your firm have the Web presence that allows for collaboration?”
(On Moshe Milevsky’s work, see his seminal column from the February 2007 issue of Research magazine, Lesson 1, The Trigonometry of Retirement Income.)
Chief Relationship Officer Jim Crowley steered the conversation toward the broker-dealer industry, saying that since 2007, “a broker-dealer has gone out of business every day.” Despite that decline, Pershing’s clearing business has continued to “grow quite nicely,” and reported that “we’ve terminated clients; we don’t do high-frequency trading.”
Turning to one segment of the broker-dealer universe — the wirehouses — Brett reported that the culture is changing, at least at Merrill Lynch, where the value of an individual advisor is now more likely to be measured by the amount of assets the broker manages rather than his “production.” Crowley said that “80% of the stay deals” that the wirehouses offered to those top producers during the height of the financial crisis “will unwind over the next three to four years,” providing a recruiting opportunity for independent broker-dealers and RIAs.
When panel moderator Lisa Dolly, Pershing’s COO, opened up the loor for questions, the first one delivered by text was about the impact of Charles Schwab & Co.’s robo-advisor offering, called Schwab Intelligent Portfolios, that had been announced earlier that day.
Tibergien responded first by saying that “people are getting over-agitated” about digital advice platforms, but recommended “look at Betterment and Wealthfront; they’re changing the client experience.”
As for the competitive aspects of Schwab’s offering, which the company said would begin with a retail offering next year followed by an RIA version, Tibergien noted that “TD Ameritrade, Schwab and Fidelity have been in the do-it-yourself space for decades.” He also warned observers not to “confuse combining people and technology with the purchase of algorithms, which is what robo-advisors do.”
Crowley responded by first noting that there’s good research showing that “the performance of do-it-yourself investors lags that” of investors who work with advisors, while Brett said he would prefer that in the discussion “we’d use ‘digital’ rather than ‘robo,’” but urged the executives to “embrace the digital element” in their offerings to end clients.
— By Mark Tibergien on ThinkAdvisor: