Industry consultants grow practices by taking on deadline projects

The management consultants seem to have all the answers.

They preach niche strategies, best practices and opportunistic growth and their quotes sizzle in newspaper articles

But when they’re not busy dazzling us with their brilliance, they’re having to look hard at their own new financial realities.

“The experience is not unlike financial advisors,” says Matt McGinness, principal of Best Practices Research in San Diego. “Everyone [in the consulting industry] is working harder for less.”

One reason for this gear shift is that clients are preoccupied, says Chip Roame, managing principal of Tiburon [Calif.] Strategic Advisors.

“Visionary projects are gone,” he says. “Nobody wants those. You’re dealing with your current problems like raising capital – what businesses do you sell?”

The reason for this selectivity comes down to money, says Philip Palaveev, president of Fusion Advisor Network of Elmira, N.Y.

“There not a lot of budgets for consulting right now,” says the Seattle-based consultant. “It’s almost turning into an emergency room. We’re doing what we can with what resources we have but we’re putting off major surgery.”

Chip Roame: “Visionary projects are gone”

The good news, according to several consultants, is that you can earn a good living – and even grow your practice – as an emergency room doctor of businesses. That’s because part of the emergency relates to big strategic shifts toward fee-based advisors.

This shift to the RIA channel is fueling demand, says Timothy Welsh who left his position as head of marketing for Schwab Institutional a few years ago to found Nexus Strategy LLC in Larkspur, Calif..

“My pipeline is longer than I’ve seen it before,” he says. “Everyone wants to sell to RIAs.”

For example, Nexus was just hired by a mortgage company in Ohio to create ways to market to advisors that use a fee-based model, Welsh says. Such an assignment would have been unheard of even three years ago, he adds.

McGinness says that he is finding two types of short-term projects that [have short deadlines but] are helping him to grow his practice. Advisors are seeking help in how to realign their compensation plans to reflect company revenues, he says.

“It’s a good environment [for finding these kinds of consulting gigs] and it’s only getting better for people working with the independent side of the market,” he says.

Dan Inveen: Advisors are distracted but
broker-dealers and custodians are assigning him
projects

Dan Inveen, principal of FA Insight of Tacoma, Wash. Says the market for consulting is healthy enough that he added two employees since the the beginning of the year when he started his own practice. Inveen was formerly with Moss Adams LLP of Seattle, which reduced the size of its consulting practice for financial advisors.

“Advisors are mindful of costs and they’re distracted,” he says. “That said, we’ve found plenty of opportunities mostly from the institutional side with broker-dealers or custodians.”

One source of opportunity is the willingness of clients to consider smaller consultancies because of the fee structures of big-time consulting firms like McKinsey & Co., Bain & Co., Roame says.

“We’re the trade-down” from the big firms, he says. “We’re the mid-priced wine. For us, the $5 million project is a $250,000 project.”

These more immediate demands have buoyed Roame’s business, which is up 15% this year after only a 7% rise last year, he says.

It’s also easy to bid against the national consultants because of the time it takes then to get up to speed on the niceties of the advisory business, adds McGinness, a former advisory researcher for Cerulli.

Palaveev agrees that this soft-budgeted market favors the smaller and nimbler practices.

“If Moss Adams [consulting practice to the financial industry] still existed [at its prior scale and staffing of a few years ago], we’d be downsizing,” he says.