You think your advisor firm is great . . . but is it? In that vein, is it as sustainable and valuable as you believe it is?
Those questions were posed at Pershing’s INSITE 2016 conference in Orlando by Mark Tibergien, CEO at Pershing Advisor Solutions, and by Jim Crowley, Pershing’s chief relationship officer. They spoke on Tuesday during the cocktail reception as most folks in the spacious exhibit hall were occupied with other matters—like grabbing free grog and grub.
It seemed an odd time to try to impart some valuable insights, but their perspective is worth repeating.
“One of the best ways to check whether your business is sustainable is to ask is your strategy still relevant,” Tibergien said. “A good test of this is to actually think about your business from a valuation standpoint. If you want a sustainable business, you have to remember that value is a function of the future, and the future is measured this way: Value equals cash flow divided by risk minus growth.”
Tibergien said advisors should ascertain whether their firm has cash flow that’s likely to continue for a long time period; should have a strong degree of confidence that the cash flow will continue for a long time period; and they should determine the future growth rate of that cash flow over a long time period.
“We find that the very best firms who are building sustainable strategies have four characteristics,” Tibergien said.
First, they have clear positioning, meaning they know who their optimal client is and they build their client service experience around that.
Second, they’ve structured their business to support their strategy.
Third, the best firms with a relevant strategy are managing the profitability not just by managing costs or driving revenue volume, but by thinking about pricing, productivity, service mix and client mix.
And fourth, the very best businesses with a sustainable strategy have a human capital plan that’s aligned with their business focus.