Murray: You really want to tell them to do that if that's what they need to do. And you want to tell them to do it someplace else.

Simonoff: Now some people believe that competitive pressures are going to raise the costs of doing business for small advisory shops and cause them to look to consolidate or become increasingly marginalized. Do you think that that's inevitable?

Murray: First of all, I don't know what the competitive pressures are in a business that's as intensely relationship-oriented as financial advisory services.

Simonoff: Everybody, from banks to trust companies to brokerages, is moving into fee-based relationships.

Murray: But how does that raise my cost?

Simonoff: It may not raise your costs, it may make it harder for you to differentiate yourself. In any case, some advisory firms are looking, for the first time, at hiring people whose sole job is to be a marketer or a salesperson. For a long time among the fee-based advisory shops, that was a dreaded word. The partners felt that they could survive largely by referral.

Murray: Yes.

Simonoff: Now they're thinking, "With all these different players coming into the business, I need someone to focus on marketing full time."

Murray: Completely different issue. I don't mind addressing one issue or the other. They're not the same issue. The premise of your question is competitive pressures raising my cost of business and therefore or thereby forcing me to consolidate. And I questioned the premise. I don't see how, if the entire world became an RIA, that that would raise my cost of doing business one iota. And therefore, I do not see how that would incent me, much less force me, to consolidate.

I reject the idea that competitve pressures, whatever those are, affect my cost structure. You then went to another issue, which is people not getting enough referrals, which is, of course, not a function of whether they have a marketing person or not, but a function of how happy their clients are. In the end, what would force me to consolidate? I need 250 or so $400,000 families to gross a million dollars. Yes?

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