“In the evolution of the wealth management business, we are now entering a period of the most profound change that we have ever experienced,” said Mark Tibergien, practice management expert and CEO of Pershing Advisor Solutions, during his keynote speech at the SS&C Advent’s Black Diamond Executive Forum held in mid-May.
According to Tibergien (the monthly contributor of this publication’s “Formula for Success” column), there is a coming divide in the independent RIA marketplace between “lifestyle practices” and “enduring businesses,” which he highlighted for more than 100 leaders of the industry’s top advisory firms, who gathered for two days in St. Augustine, Florida.
“There are roughly 28,000 independent RIAs in the industry. and yet only 650 of them have more than $1 billion in assets under management. This means the most of firms are functioning as small practices and will die when the owner retires,” he explained.
This has big implications for the industry, according to Tibergien, particularly because these firms potentially are not holding true to their fiduciary duty to put clients interests first by creating an organization that will live beyond the founder.
The typical practice is “personality driven” in that the firm is highly dependent on one or two key leaders, which suggests the mortality of the firm if something should happen to them, the Pershing executive explained.
“If you have failed to plan and have not done the final step, then are you acting in the best interest of clients?” he asked both the audience and, more broadly, the industry.
Being the practical-minded executive that he is, Tibergien didn’t leave the group hanging as he provided secrets to success for advisors that he has developed through long-term study of the industry and his own entrepreneurial endeavors.
To become one of those enduring businesses, firms should have a clear mission, vision and strategy to not only define who an optimal client is, but to then structure the firm to support that ideal client. Everything from the marketing message to the office environment, technology and client-service experience needs to be aligned along that vision, especially in terms of staff development.
“Enduring businesses are process driven, not leadership driven,” Tibergien said, recommending that firms develop a human capital plan that is aligned with the firm’s overall vision. “This means that you create a deep bench of talent and invest in your people so much so that you ultimately value a great employee more than a great client, which is a pretty dramatic mind shift for most firm owners.”
The Client Experience Next, the executive encouraged advisors to “create real engagement” with clients by focusing on the client experience, a concept so important and popular these days in the management and technology spheres that it now has its own acronym: CX. In Tibergien’s mind, though, CX is not solely about technology.
“What we mean by creating real client engagement is to focus on the experience in totality,” he said.
Like others in business, Tibergien once had a tight connection on an airline flight, and due to the large distances between gates, thought he would miss his connecting flight. The airline, however, had other plans.
Thanks to Tibergien’s priority status as a million-mile flyer, it sent a gate agent in a sports car to pick him up as he deplaned and literally drove him across several runways to the cross-airport gate so he could make his flight in time.
“Now that is a great story about a service experience [for] an airline that I just told 100 people here at the conference,” Tibergien said. “Do your clients do the same? Just think of the potential for growth and refer-ability if they did!”
To better define that service CX, advisors need to think beyond how they are managing the money to encompass how they navigate the entire relationship. “Your changing client needs call for a revised experience strategy,” he said, pointing to the limitations of the typical quarterly reporting process most advisors use as their main deliverable to clients.
“For many clients, this is the only communication they receive from their advisor, which brings them … a focus on their portfolios’ performance. What other processes and communications do you have to remind clients of what you are doing for them everyday? Unfortunately, this is how most advisors are demonstrating their value and is a huge missed opportunity,” the Pershing executive explained.
Tibergien believes changing this approach is important for advisors, because firms leading in CX are growing their businesses five times faster than those that are not. Additionally, the top three firms in a market get twice as many opportunities to do business than the fourth. In conclusion, the practice-management expert expressed his absolute enthusiasm for the industry and its growth prospects for advisors: “This is a unique time in wealth management, and the opportunity for leaders has never been bigger; however, it is up to you to translate your vision into action.”
While not all CX is tied to technology, advisor tech certainly plays a large role and is critical in helping advisors deliver on their service promises in an efficient, scalable and profitable way, according to Tibergien.
Portal Rollout The event also focused on innovations, such as Black Diamond’s new client portal, Investor Experience. The client portal lets advisors offer their clients a personalized, custom-branded and interactive online environment that is accessible anytime, anywhere on any device, according to Steve Leivent, senior vice president of SS&C Advent.
Black Diamond’s Investor Experience was designed to differentiate advisors in the highly competitive market for high-net-worth investors, Leivent said. In this context, digital channels are crucial for client relationships, because they give advisors the ability to custom-tailor content for their client’s unique financial situation.
To help advisors execute on Tibergien’s recommendations around enhancing CX, the new portal gives investors direct access to their advisory team and to all their financial data 24/7. Investors can personalize their experience, so they have a clear picture of their spending, budgeting and goal tracking. The portal also features a relationship timeline, which brings to life key interactions and decisions that have occurred throughout the course of the partnership and demonstrates advisors’ commitment and value to their clients in a highly visual way.
Leivent also shared some eye-popping statistics on the growth of the Black Diamond wealth platform: It is used by over 1,200 firms and has 1.5 million accounts representing $750 billion in assets.
The conference also featured the introduction of “global reconciliation,” which uses AI in the form of machine learning to enhance data quality coming from the many banks, broker-dealers and custodians into the Black Diamond system. Leveraging the ‘big data” from Black Diamond’s 1.5 million accounts, the system “learns” over time how each institution provides various forms of data and treats exceptions such as stock splits, proxies, etc., so Black Diamond becomes faster and more efficient at processing the vast amounts of data it receives daily.
Other technology presentations at the forum came from Black Diamond integration partner firms SS&C Salentica, a recently acquired CRM platform; Riskalyze, a popular risk analysis and scoring system; research and technology provider Morningstar; tax-optimization platform LifeYield; data aggregator Quovo; and Blackrock, the world’s largest asset manager.
Timothy D. Welsh, CFP, is president and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry, and can be reached at firstname.lastname@example.org or on Twitter @NexusStrategy.