The Enduring Advisory Firm. Mark C. Tibergien

Mark Tibergien

      The Enduring Advisory Firm

      The Bloomberg Financial Series provides both core reference knowledge and actionable information for financial professionals. The books are written by experts familiar with the work flows, challenges, and demands of investment professionals who trade the markets, manage money, and analyze investments in their capacity of growing and protecting wealth, hedging risk, and generating revenue.

      Since 1996, Bloomberg Press has published books for financial professionals on investing, economics, and policy affecting investors. Titles are written by leading practitioners and authorities, and have been translated into more than 20 languages.

      For a list of available titles, please visit our Web site at www.wiley.com/go/bloombergpress.

THE ENDURING ADVISORY FIRM

How to Serve Your Clients More Effectively and Operate More Efficiently

Mark Tibergien

Kim Dellarocca

      Cover image: Business graph © MF3d/iStockphoto; Wall Street Sign © kevinjeon00/iStockphoto

      Cover design: Wiley

      Copyright © 2017 by Mark Tibergien and Kim Dellarocca. All rights reserved.

      Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

      Published simultaneously in Canada.

      No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at www.wiley.com/go/permissions.

      Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

      For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

      Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

      ISBN 978-1-119-10876-4 (Hardcover)

      ISBN 978-1-119-10881-8 (ePDF)

      ISBN 978-1-119-10879-5 (ePub)

To Arlene Tibergien, Mark's wife, companion, and rock for

over 35 years

To Nico Dellarocca, the best thing that has ever happened to

his mother, Kim

      Acknowledgments

      We consider ourselves fortunate to have found work that is fulfilling and challenging. Through our combined 60-plus-year journey we have learned a lot about the kinds of investments firms need to drive success. Above all we have learned that the most important investment one can make is in others. We have learned that the quality of our relationships is the biggest driver of our happiness and success. We have learned to slow down, to be present, to think win-win, and to do our best to build others up. We have learned that sharing our talents and wisdom matters, often most to those individuals whom we may never meet. We have learned to let go and laugh more. We have learned that friendship promotes the happiness of all.

      We are grateful to include here a small list of those friends who have lent their wisdom and inspiration to the book, provided coaching and opportunities along our path, and been the people we most enjoy simply sharing a laugh over a bottle of wine. They are:

      The members of the Pershing Executive Committee, especially Lisa Dolly, Jim Crowley, and Caroline O'Connell.

      The members of the Pershing Advisor Solutions Executive Committee, in particular Karen Novak, Gabe Garcia, Ben Harrison, and Evan LaHuta, and the incredible team of professionals who make this company a great place to pursue our career objectives.

      Our clients and friends, Gerry Tamburro, Jim Pratt-Heaney, Andy Reder, Ross Levin, and the Pershing Advisor Council, for opening their businesses to us to study and for sharing their experiences.

      The provocative thinkers who inspire us: John Hagel, Cam Marston, and Philip Palaveev.

      Our families, friends, teams, and colleagues who supported us in achieving this as well as so many other important goals.

      John Wiley & Sons and our editor, Christina Verigan, for their help, focus, and flexibility.

      We would also like to thank each other. We have had an enduring friendship for many years, and our efforts to put this book together did not compromise our relationship as some had predicted – rather they made it stronger.

      Mark Tibergien and Kim Dellarocca

      Preface

      Financial services firms have long operated independently. The 1980s ushered in two variations on existing business models that accelerated the growth of the entrepreneurial mindset in which practitioners became owner/operators instead of working as employees of another firm: Registered Investment Advisors (RIA) and Independent Contractor Broker/Dealer (IBD) reps.

      Now we are seeing a couple of new dynamics: first, the transformation from practice to business; second, the emergence of multi-owner/multi-employee advisory firms. In this light, the notion of independence becomes a bit murkier because there are more mouths to feed, more constituencies to please, and more competition for strategic direction from multiple points of view. While ownership may be independent, the notion of making decisions without the influence of others is less true.

      That said, RIAs are the purest form of independence in that they are free of broker/dealer oversight and overrides on their compensation, whereas the IBD model is subject to supervision by the broker/dealers with whom they affiliate and they must share an override on their revenue production with the broker/dealers. There is also a difference in approach to business as recognized by their different regulatory structures, i.e., the SEC vs. FINRA: the RIA model is composed of professional buyers whereas the IBD model is composed mostly of professional sellers, meaning that in the former, they get paid directly by the clients and act as fiduciaries or client advocates on all accounts; whereas broker/dealer reps get paid on a grid for the products they sell and for the most part operate under a suitability standard, though a recent ruling by the Department of Labor will change that condition for retirement accounts.

      There has been some morphing of these identities in the past decade, however, as many IBD reps have either formed their own RIAs or became Investment Advisor Representatives (IAR) of their broker/dealer’s corporate RIA. (Those who are registered