Building a Sustainable Advisory Business

Mark Tibergien


Mark Tibergien, Chief Executive Officer of Pershing Advisor Solutions, outlines the key trends shaping the advisory industry today and the actions that top firms are taking to help ensure that they have a business built to last. He also notes the characteristics of those firms that are building not a "practice," but a true multi-generational "business."

Video Transcript

This is a profession that is going through an incredibly profound change. There are a number of drivers of this, of course. For example, there is the level of growth and profitability that we’re seeing in firms, the inability to attract talent to the business, even the reputational challenges of this profession. But probably the most significant one is this shift from the Baby Boomer generation to Gen-X and Gen-Y. It’s transforming the way this business is going to be viewed, and the way clients interact with us. I think it will make a big difference in how we price, how we staff and how we create a client experience that is going to make a difference. I think those firms that are not prepared to transition their business to the next generation of professionals will certainly be left behind. For that reason, I expect that there will be further consolidation in the advisory space. I think there will be many more larger firms that are operating in the business, and I think we will look at a profession that is very much like the accounting and legal professions in terms of their structure.

It is pretty obvious that there are at least five characteristics that seem to distinguish the top performing firms. The very first characteristic is that they are very clear on their positioning, meaning they can define who their optimal clients are and why those clients do business with them. Second, is that they are structuring their business according to their positioning. That means that they know exactly what kind of an enterprise they are trying to create, and so the people they hire, the technology they use and the organization that they build really reflects that position in a very clear way. The third characteristic of the best performing firms is that they have a human capital strategy aligned with their business proposition. The fourth characteristic of the best performing firms is that they actively manage to profitability. What I mean by that is they’re not just thinking in terms of cost control or driving revenue, but they’re thinking about how do they price according their positioning; to demonstrate value, not just how to generate a return. So firms who do that tend to be top performing. The fifth characteristic is that they have a process for systematically eliciting client feedback. This goes beyond just the daily or quarterly interactions that they have with clients. There is a process to understand needs and behaviors, wants and fears, that allows them to evolve their business to be relevant to their client base.

There is a big debate today in the profession about whether one should create a practice or a business. Without being judgmental about it, if we think in terms of creating an enterprise to last—creating something that is enduring—then evolving the practice away from an individual to where it includes multiple people that can continue the business onto the next generation. Really, this is the proper way to think about it. But unfortunately, most practices are not positioned for succession, as an example. They don’t have people in position to take over the relationships. And, as the fiduciary, it is their responsibility to ensure that their clients are taken care of in the long term. Often times, people think that scale can only be accomplished in technology firms or manufacturing firms where you don’t require a lot of people. But truth is that scale—when we look at the actual definition—is growing profits faster than expenses. What we recognize today, I think more than ever, is the relationship that our clients have with our firms is one of trust, hope and the belief that your business is going to be enduring and around when I need you. It is a question that, as clients, we ask: What will happen to me if something happens to you? In a way, the idea is to achieve scale as part of the fiduciary responsibility. That becomes a big challenge as we think about building out the business today.

I think the second element is many advisors believe that they have created value in their business. The truth is that their clients are probably as old as they are and they may be in withdrawal phase rather than accumulation phase. To regenerate, you have to think about how you build redundancy, capacity and scale of the business to accomplish that. All of these elements—strategy, structure, people, profits, ultimately determine how do you serve clients, not just of this generation but in subsequent generations.

Mark Tibergien

About Mark Tibergien

Mark Tibergien is Chief Executive Officer of Advisor Solutions at BNY Mellon | Pershing and a member of Pershing’s Executive Committee. Pershing is one of the country’s leading custodians for registered investment advisors and family offices. Mark is also a member of BNY Mellon’s Diversity & Inclusion Advisory Council to the CEO.

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