The major custodians are taking a leaf from the page of the independent broker-dealers who, in the best of cases, look beyond their advisors' need for trade execution to the entire area of practice management. B-Ds like LPL Financial and Commonwealth Financial Network have, for years now, formed practice management consulting divisions to help their advisors improve their practices based on individualized practice consulting engagements. Now, the major custodians-Pershing, TD Ameritrade, Charles Schwab and Fidelity-are doing the same, at least, for their better-heeled clients.
This article surveys the practice management departments and services of the Big Four and assesses the value of those services from the standpoint of both the custodian and the advisors receiving assistance. What do the custodians offer, and how do advisors value these services? Are the custodians providing what advisors need, and are advisors making lasting changes based on the advice they're receiving?
Mark Tibergien, president of Pershing Advisor Services, and Kim Dellarocca, director of global marketing, are directly accountable for Pershing's practice management solution. "For us, practice management is different than business management in that it focuses on the technical aspects of giving advice such as business growth, operational efficiency, risk management, human capital and business transition support," Tibergien says.
Pershing's solution begins with a diagnostic tool called Pershing Health Check. Based on the above-mentioned technical aspects, "The Health Check provides a 'red/yellow/green' stopgap chart analysis of the advisor's firm and provides scores for each section," Dellarocca says.
It then generates a living, breathing document called the client development plan that is reviewed at least quarterly with the advisor during the implementation phase of the relationship. "The Health Check Tool was developed to streamline the fact-finding and data-gathering process regarding how the advisory firms are run and what their pain is," Tibergien says. "It was also built to help the firms self-discover their own issues."
How Pershing differentiates itself in practice management services is the client experience. It is not just a matter of providing advisors with advice to implement on their own. There is a time and a place for self-directed tools, but the value-added nature of the Pershing service is its personal touch and accountable consulting.
Don Dewaay is the CEO of Dewaay Capital Management in Clive, Iowa, which consists of a broker-dealer and an RIA managing just under $1 billion for more than 3,000 clients nationwide. Dewaay says Pershing has provided ongoing support for its outside advisors in other states, first-level practice evaluation support and best practices for advisory firms, and it has also looked at their current setup and provided feedback. "Tibergien is a visionary," Dewaay declares. "When we work with him and his staff, they listen carefully and understand what it means to differentiate one's self in this industry. We've had assets at a lot of different places over the years, and Pershing is more entrepreneurial than others."
Steve Braverman, the co-founder and managing director of Pathstone Family Office in Maplewood, N.J., says his firm is a family office for 25 wealthy client families representing $2.5 billion under advisement. Says Braverman, "We've partnered with Pershing, adopting their best practices in areas central to our mission, such as paying bills for clients and creating an ownership culture within our firm. They've helped us a lot as well with compliance and operations and budgeting and financial forecasting."
When asked what Pershing believes are gaps in its current offering, Tibergien observes, "We have been actively recruiting more relationship managers for better control of our practice management deliverable and high client touch, but we don't yet have an effective process for measuring the impact of our practice management solution. We would like to be more systematic about this and will be working on this area in the coming months to build out a solution."
Would Dewaay like to see additional services he's not presently getting from Pershing? "From our perspective, we're pretty self-sufficient and easy to work with. Aside from trading activities, we don't demand a lot."