Lack of capacity is the main deterrent to achieving growth within advisory firms, according to
Mark Tibergien, chief executive of Pershing Advisor Solutions.
“The single biggest inhibitor to growth is lack of capacity,” Mr. Tibergien said Tuesday at the
InvestmentNews Best Practices Workshop in New York City.
The average adviser has roughly 1,800 hours available in the work year, but approximately 60% of that time is spent “on crap” such as compliance issues and management meetings, while the remaining 40% is spent on client service, Mr. Tibergien said.
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Of the time spent servicing clients, advisers take about 20 hours per year on each “high-value” client, 10 hours on those considered mid-value and five on those considered low-value, Mr. Tibergien said.
On an industry level, the rate of growth has slowed at advisory firms, productivity in many cases is declining and margins are getting squeezed, according to Mr. Tibergien.
“Advisory firms are getting bigger. Some may think bigger is better, but it depends what's happening underneath,” he said.
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The optimal advisory firm uses a “leverage” model to help boost adviser capacity, which allows advisers to delegate some responsibilities to lower-cost employees, Mr. Tibergien said, who acknowledged it's a “hard concept in this business.”
The model uses a five-level pyramid, starting at the bottom with employees to which advisers can delegate some work to free up capacity, such as analysts and senior analysts, then moving up to those with more relationship-focused positions such as advisers, senior advisers and partners.
