One Profession, Many Firms

From time to time, I'll hear from a reader who says they enjoy Financial Advisor but they think that we, and our competitors, devote too much space to larger firms in the advisory business. It's a question some of our columnists, most recently Rebecca Pomering, have dealt with from time to time.


Is there a conscious bias to skew our coverage in that direction? I don't necessarily think it's a bias.

Larger firms typically have higher profiles than their smaller rivals. Most big firms also started out as small firms. They have evolved through more phases in their business life, so they frequently have more elaborate, complex stories to tell. Moreover, larger firms often offer more services, so the reporter has more material to get his or her arms around.

There's also a simple fact of life: In the last five to seven years, a number of very large firms have emerged, businesses on a scale that simply didn't exist before the late 1990s. According to a study conducted by Pershing Advisor Solutions and Moss Adams, in 2012 RIA firms managing more than $4 billion in assets will be in every major market in this nation. For the sake of comparison outside the independent universe, this contrasts with the average wirehouse branch, which has about $1 billion in assets.

While the numbers are impressive, I don't believe there is any major correlation between the size of a firm and the quality of its advice. As an example, I'd happily recommend the author of our June cover story, Bill Bengen, to close friends and family. Except that Bill, who is a solo practitioner with about $50 million under management, isn't taking on any new clients these days.

Take a look at the medical profession. There are some very gifted solo practitioners out there who are a lot more respected and successful than a doc-in-the-box toiling at an HMO.

On occasion, I've heard various folks try to make more out of this than I think really exists. These commentators have tried to paint a picture of two professions, one small, one large, each out of touch with the other, a variant on the "Two Americas" theme that former North Carolina Senator John Edwards has tried to peddle unsuccessfully for four years now.

So when I read Jeff Schlegel's article on page 87 in this month's issue on private equity firms looking to acquire small- and mid-sized advisory firms, I realized just how far this business has come so fast. It's still so young it's possible to divide the business into two or three different prototypes, and size is only one yardstick.

Evan Simonoff

P.S. To hear an extended discussion of these and other issues, you should go to and sign up for our Financial Advisor Symposium in Chicago from October 8-10.