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?

Pershing
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."

Braverman says he would like more, though. "What we really need now is assistance that relates to the specifics of our business and the softer client issues, such as how do we run engaged family meetings and how do we assist in speaking to the next generation? We want help with understanding behavioral finance and how it relates to our clients. More clients are focused on philanthropy, and while Pershing runs a donor-advised fund, we'd like to see some deeper resources around family philanthropy. To summarize, we need help addressing the human side of our business."

TD Ameritrade
Michael Watson, managing director at TD Ameritrade, is responsible for the overall management of TD's practice management deliverable.

"TD defines practice management consulting as 'the business of managing a business.' Firms need to have the right people, process and technology," Watson says. "That is how TD approaches and delivers its practice management deliverable."

TD helps advisors take their businesses to the next level with processes that translate their business objectives into a documented plan with measurable results. "That's important," says Watson. Hence, their deliverable focuses on seven key areas:

Growing the business

Optimizing efficiency

Exceeding client expectations

Risk management

Practice equity

Self-positioning the advisor as an expert

Maximizing human capital

The delivery of TD's practice management solution is provided through one-on-one interactions with senior relationship managers or practice management consultants, third-party vendors, Web tools, webinars, regional conferences and workshops and national conferences. Some gaps TD feels it needs to improve in its offering are providing better customer intimacy and being able to gather better analytical information to provide more customized firm benchmarking. Most important, TD is working on being able to provide more accurate metrics around the support they provide. They would like to be able to give an advisor using one-on-one practice management consulting solutions, for example, a scorecard of how much better or worse the firm is doing by implementing the recommendations made.

Shannon Eusey is the president and founder of Beacon Point Advisors in Newport Beach, Calif., overseeing $4 billion for both private clients and nonprofits. Eusey says she sat on the TD Ameritrade Advisor Panel for a couple of years and was exposed to TD's practice management solutions. "We didn't have a CRM a couple of years ago, so we implemented one with TD's help, we improved our e-mail archiving, implemented LaserApp software and created client portals to give clients access to a secure site for report viewing." Eusey says Beacon Point implements much of TD's research but still needs a back-office and even front-office assessment.

"While running the business, we don't always see areas we can improve upon, so feedback from someone not involved in the business day to day is very helpful." She says technology help is also needed since technology is always changing. "TD Ameritrade is in our office quite a bit. Every time we leave a meeting with them we come away with something we can employ in the business."

Tony Mazzali runs CG Financial Services in Haslett, Mich., providing traditional wealth management services to clients over four to five states with more than $500 million under management. "We integrate tax services with wealth management," says Mazzali, "doing tax preparation and bookkeeping, in-house estate planning, etc. Our unique proposition that we're a one-stop shop."

Mazzali says CG has reached out to TD and mostly used its technology consulting services. "We leaned on TD for support in establishing a CRM and portfolio management system, for data clearing services, for storage and security. When searching for a portfolio management system, TD gave us five to seven vendors and provided us with industry reports and their own pros and cons so I could choose one."

Mazzali notes his firm could use help in developing a "metric system" to blueprint his business. "In the past, we've submitted input to industry studies performed by Moss Adams and we're using the output of those studies, such as ratio analysis, to help pinpoint our own firm's strengths and weaknesses."

Mazzali knows he also needs more help integrating tax services into the firm, whether by acquisition or partnership. "We would see TD's role as facilitating strategies and concepts and putting feelers out to accounting firms that would like to partner with individual advisors. The third area where we need help is benchmarking-not only financial metrics, but what strategies are effectively working out there," he explains. "I get lots of marketing and other ideas thrown at me at meetings but I don't have [a benchmark] to track whether an idea works once implemented. TD could help decipher and work with firms on this."

Jeff Powell, founder of Polaris Equity Management in San Francisco, manages $225 million with seven employees for about 300 clients. "We left Bear Stearns for TD about six years ago," Powell says. "We got involved with their myriad of practice management services early on in working with them."

Powell describes their involvement in a strategic relationship formed with John Bowen and CEG. It's "a yearlong pilot program where 25 of us attended quarterly meetings in New Jersey and San Diego that ended up reshaping where my business is," he explains. "We started the program in 2005 with $65 million under management. CEG went through every aspect of running the business and TD helped supplement the cost of the program. We qualified for this because we'd volunteered and because we're a larger firm (although one of the smaller firms participating)."

Powell says TD has also helped them move off their reporting platform onto a new one, and when they were unhappy with their rebalancing tools, TD helped them find a better solution. "We work very closely with our key accounts manager who comes up from San Diego whenever we bring on someone new for training. We get a lot more attention for our size than we would with other custodians. I can even get through to Tom Bradley if I need to."

He says there's very little he needs from TD that he's not already getting. "The biggest thing we would like is a strong offering on succession planning. We're looking to acquire smaller firms and would like more help in this area."

Fidelity
David Canter is the executive vice president of practice management for Fidelity Institutional Wealth Services and defines practice management consulting as "providing intellectual capital from Fidelity around best practices, resources and tools to advisors on the key issues affecting their practices today and in the future."

Over the past three to five years, Fidelity has spent a lot of time and resources on enhancing its program. The solution is divided into three pillars:

Growth

Maximizing productivity

Protecting advisor practices

Fidelity's deliverable is structured like a medical exam. You diagnose the patient-the practice-and you propose a course of treatment and follow-up to determine if the treatment is working.

Fidelity's practice management offering helps advisors diagnose the pain they're feeling and proposes a course of action for the firms to implement to decrease this pain. Fidelity's deliverable is provided through face-to-face interactions with relationship managers, practice management consultants, third-party vendors, Web solutions, webinars and workshops.

When asked what Fidelity feels are the gaps in its current deliverable, Canter believes the industry is looking for more actionable solutions. Fidelity is working toward building out more solutions to meet this need, he says.

Andy Wallerstein, CEO of Avalon Trust in Santa Fe, N.M., describes his firm as a 12-year-old wealth management and trust company serving wealthy individuals, families and trusts. "We have about $400 million under management and offer a high-service family office type of management," says Wallerstein.

Wallerstein says Avalon has been involved for more than a decade with Fidelity. "We joined them because we felt they had a well-articulated service model for folks like us ... not just trading and technology, but practice service pieces, too." In addition to the technology consulting Fidelity has provided Avalon, it's also provided HR assistance and insurance-buying opportunities.
"We had used an HR agency that consulted with us on hiring an analyst. We posted the analyst position on the CFA Web site and had 80 resumes pour in," Wallerstein says. "Fidelity helped us articulate the job description and narrow the field down to 12 to 13 people. They then interviewed all the finalists and wrote us a memo on each, narrowing the field further down to four or five people."

Wallerstein notes Fidelity functioned much like an in-house HR department. Since Avalon was billed hourly, the cost was just a few thousand dollars rather than the large fee a headhunter would have charged.

In addition to the HR function, Wallerstein says Fidelity helped Avalon significantly reduce its premiums for E&O insurance. "As a trust company, we'd been paying about $22,000 per year for E&O. We're hard to rate since we're not easily pigeonholed."
Wallerstein says Fidelity put them in touch with the insurance agency of Starkweather and Shepley. "They put the bid out to some carriers and we ended up with better coverage at half the price."

Wallerstein is completely satisfied with Fidelity's practice management services and says the only help they need now is getting new clients. Says Wallerstein, "Fidelity completely exceeded my expectations."

Paul Brahim, executive vice president and managing director of Pittsburgh-based BPU Investment Management, is also a Fidelity advocate. "We're a dually registered firm of 42 employees serving middle-class millionaires-typically with $500,000 to $5 million of assets-with wealth management services."

Brahim says Fidelity has worked extensively with BPU to bring in outside specialists to create the look and feel of its brand. "They designed a corporate capability brochure, provided input on our Web content, brought in a marketing/graphics company, and we worked with an internal Fidelity consultant to put that all together."

Brahim hasn't found Fidelity's practice management services lacking. "They do so much for us it's hard to say what we're not getting that we would like to have."

Schwab advisor services
Scott Slater, the managing director of business consulting at Charles Schwab, says Schwab defines its practice management solution as business consulting-that is, helping firms move from being a practice to being a profitable and growing business.
About six years ago, Schwab began to invest in resources to build the business consulting internally and provide proprietary content and solutions. Now Schwab's deliverable covers the following areas:

Technology consulting and support

Marketing and business development

Human capital

Business and strategic planning (benchmarking study)

Transition and succession planning

Compliance

Schwab provides its solution through face-to-face interactions with relationship managers, third-party vendors, Web solutions, webinars, white papers, benchmarking studies and regional events. Slater feels the gap that Schwab needs to fill in its business consulting solution is providing more extensive customized solutions. Schwab wants to provide deeper actionable solutions around important areas like succession planning.

Bob Barry has headed up Barry Capital Management of Hackettstown, N.J., since 1983. "We're primarily a financial planning firm that provides asset management," says Barry. He says the firm serves middle-income to high-net-worth families with just two people, although he's looking at adding two more in 2011. "We probably won't get much bigger than four to five people," he adds.

What practice management services does Barry receive from Schwab? "Schwab makes very good practice management research available to advisors, like its compliance newsletter. The issue for us has been how to integrate that data into day-to-day practice management practices; that's where Schwab falls short."

What Barry really wants, though, is demographic data. "It would be nice if we could pull demographic info from Schwab ... a breakout that says here's total clients, average age, females, males, average account size, dollar value of qualified and non-qualified accounts ... we've done that using Salesforce but it takes a lot of time and it's not particularly convenient."

So many companies make applications available through Salesforce, says Barry, that he would love to see Schwab build a practice management app for Salesforce. "We have no issue with paying for it," he says.

The other thing Barry wants is to be able to get his firm's numbers based on Schwab's benchmarking data. "They could make available each quarter or year a report on new dollar growth and some year-end compliance info, like accounts by state, by net worth, etc. We're lucky to get Schwab data downloaded into Salesforce, but we still have to build out all the reports to make it usable."

Barry says he would also love to have a practice management consultant help him develop a forward-looking model that addresses where his firm is going and how he's going to track progress toward that goal. "There's a great deal of interest among planners in doing those things necessary to build a fundamentally sound business, but how do you find time to pull it all together and get it done?"

Cheryl Holland presides over Abacus Planning Group Inc. in Columbia, S.C., where 18 employees manage about $620 million in assets for 150 clients including women, physicians and families with closely held businesses.

"We have a very good relationship manager at Schwab," says Holland. "If you have one that understands your firm, they can bring so many options to the table." For example, says Holland, Schwab is getting ready to do training around the country on referrals and business development. They also do a pretty good job with white papers, she says.

Holland has had Schwab come in twice to do a back-office review of her firm's technology. "Schwab has a technology scorecard allowing us to look at technology solutions versus phone and paper solutions and how we score on adopted technologies versus scores of other advisors. We can pull this information off Schwab's Web site quarterly."

What would you like to see, we asked Holland? "I'd love to see electronic signatures ... small things like that, and help on business development since helping us helps them grow too." Holland says she'd also like to have more insight into leadership and management skills and strategic planning. "As we get bigger, people are less willing to share. I can't just call up a $2 billion firm and ask to spend a day with them, and consultants are expensive." Holland says she'd also like help with mergers and acquisitions.

Spencer Segal, CEO and founder of ActiFi in Minneapolis, a software and solutions company that creates scalable business execution and practice management programs for the financial services industry, discusses what the major custodians should be doing to provide practice management assistance to their advisors.

"It's a three-part equation," says Segal. "The first step is diagnostic-understanding what advisors need. The second is really understanding what the advisor is motivated to do. What I've learned is that advisors' capacity to work on their businesses is limited because working in the business consumes most of their time. And third is follow-up and ensuring execution and accountability.

"A majority of custodial practice management offerings are what I'd call 'drive-by consulting,' meaning a consultant comes in, puts together a plan or white paper or PowerPoint that says, 'Here's what you need to do,' yet there's no systematic follow-up to see if the plan was executed.

"Generally speaking, custodians have done a good job of bringing awareness and knowledge to most aspects of practice management," says Segal. But the single greatest opportunity is on the execution side of it. "The issue is the ability to create that shared accountability and ensuring execution."

David J. Drucker is a principal with Virtual Office News LLC and editor of Technology Tools for Today newsletter. Gary Davis Jr. is a principal with Beneficial Concepts Group LLC and an operations consultant to financial advisors, as well as vice president of practice management for MarketCounsel.