Mark Tibergien: Pershing is poised to double RIA assets in two years

Brooke’s Note: It is a great honor to have one of my most knowledgeable sources in Tim Welsh interviewing another one in Mark Tibergien and having the Socratic interchange appear here at RIABiz. One nice thing about Mr. Tibergien is that you know who you’re getting but not always what he’ll say. A few of his thoughts here made me say, “wow”, “really” and “you don’t say.”

Here at the 2014 Pershing INSITE conference in Hollywood, Fla. yesterday I sat with Pershing Advisor Solutions chief executive Mark Tibergien and asked him the fast-pitch questions. With an assist from his head of sales and relationship management, Ben Harrison, Tibergien, in his inimitably eloquent style, delivered answers to the pressing RIA issues including his firm’s thoughts about robo-advisors, middleware companies like Dynasty Financial and other new-model players. He made clear where he sees BNY bolstering the Pershing to make enormous gains by 2016.

Tim Welsh: What are the latest stats for Pershing?

Mark Tibergien: When I got here, we had $30 billion in assets and today we have over $130 billion. What is notable about our progress is that the number of advisors over that same period has stayed roughly the same at 550 firms.

We have changed the way we had thought about the business, and as a result are focusing on the larger, more business oriented RIAs. Reflected in that is the profile of the end investor of those firms, which is much bigger than the average size of our competitors at $3 million to $4 million (of invested assets). We are not pursuing a mass affluent strategy and our focus is on firms north of $250 million. See: Mark Tibergien is making Pershing an industrial strength custodian with an RIA service touch.

Here at INSITE we are hosting over 2,300 attendees in one big tent with representatives from 22 countries in all business disciplines, trust companies, RIAs, B-Ds and more.

TW: What are some big wins that can be mentioned from the past year of teams? Where did they come from?

MT: One notable account is Orgel, which was made up of the largest team at RBC. Our large prospects, the types of businesses we are targeting, are changing. They are larger, more complex and need a truly institutional platform that can accommodate both brokerage and bank custody, enable firms to run their own mutual fund, and other aspects that require more sophisticated administration and accounting. With Pershing, firms can get it all under one roof.

Working in a multi-custodial role is natural for us. Firms come to us often as a complement to the traditional retail oriented, discount broker custodians. The larger, more complex firms need more from their custodian in order to service their high net worth clients, such as access to alternatives, private banking and bank custody.

TW: I see you’ve done deals with Dynasty Financial Partners but not the roll-ups. Why has Dynasty been a good fit?

MT.: Dynasty is more of a middleware firm and not a traditional roll up. Dynasty is very compatible with our target market of the high net worth marketplace that needs a private banking capability, lack of a retail brand conflict and more.

Our approach is bespoke and customized, so we work with Dynasty in a dynamic way, Dynasty has been a very good partner — Shirl and his team have been great to work with and a great example is Hal Lambert (Point Bridge) from Credit Suisse. See: Pershing, Dynasty and Envestnet gang-tackle Credit Suisse and jolt loose $1 billion duo.

But ultimately, those type of relationships are frankly not our target market. We prefer to work directly with firms so we can solve their issues first hand.

TW*: We’re starting to see companies like Envestnet and Fidelity do thinking around robo-advisors. Does Pershing see a place for itself or its RIAs in this tech-centric model? See: Bill Crager: I’ve got your back against the attack of the killer robo-advisors.

MT: It’s important to remember Pershing’s role in the food chain. We don’t do retail, however, we do support the ecosystem in a number of different ways, which is reflected in the ecumenical nature of our conference here today. We include all types of service providers and one example is the clearing and custody solutions we provide to digital advisors such as Personal Capital.

We are taking an active role in strategizing around the digital advisor and how do we provide clearing, execution or custody whether they are an RIA like Personal Capital or a broker dealer like Motif.

Our view of this emerging advice offering is focused around the current strategy of RIAs, which is a business built by and for baby boomers. However, for younger investors, the approach is different and RIAs will need to create a connection between the digital and human advisor. There will always be that human touch, but the opportunity is there for more of a digital experience.

As for the digital advisors themselves, the real question is: Can they grow to profitability? For many businesses, the biggest risk of bankruptcy is in the growth stages and we will see if these platforms grow broke. Additionally, do they have the management skills to support themselves and can they manage the compliance and regulatory challenge? These businesses are very complex and have a lot of moving parts — they can’t be casual about it, particularly for the small investor, the digital advisors will need to create or rent surveillance and compliance capabilities. That is always costly.

TW: The relationship in Pershing and BNY continues to be a marriage that fascinates but confuses people. They seem separate but the same? See: After trying life as two silos, the custody units of BNY Wealth Management and Pershing will largely merge.

MT: Our competitors may be confused, be we are not. We are very married and snuggle up to each other every night.

Let’s remember that BNY bought Pershing 10 years ago and over that long period of time the integration gets deeper. As an example, we have the same private banking service that BNY wealth management offers and their private bankers actually physically sit in our PAS offices. The asset management boutiques of Standish and the Boston Co. are made available to advisors using Pershing. Both custody businesses report to me and I sit on the operating committee for BNY Mellon. On the technology front, we are tying together both bank and brokerage custody through the same user interface

Ultimately BNY Mellon is the largest custodian in the world with over $26 trillion in global assets with clients in 50 countries. Why would we want to lose that name? Our competitors like to sow confusion, and they may be confused, but we certainly are not.

TW: How has this internal melding led to new business? Can it be quantified? What is the “killer app” of the combination?

MT: It is absolutely leading to new business and one of the best examples is Private Banking. We are able to deliver the whole firm and help advisors handle their client’s entire balance sheet, not just the investing side.

We’ve made over $500 million this year in new loans, jumbo mortgages, and investment credit lines. As a result we see that for every $1 we lend, advisors gather $2 in new assets. This makes RIAs far more competitive especially when they are dealing with wirehouse competitors. The killer app is that we know the community that we serve and have no dilution of focus.

TW: People say Pershing’s service has improved but still a far cry from the silky Schwab-level service at Schwab and to a growing extent, Fidelity. Is this an area where you are looking to improve and how?

MT: We have a saying that perfection is aspirational and when it comes to service it is a top priority. We measure anything that moves and our service scores in terms of both loyalty and satisfaction has improved consistently over the years. Our stated goal is to not be noticed by our RIA clients and really become an extension of their brand because we are meeting their needs so well.

The nature of this business creates tension and we aim to avoid mistakes for the more routine service items and invest in customized service for the more complex. While it hasn’t always been that way, that is deep in the past, and is no longer an issue. If we weren’t good at service we wouldn’t be in business.

TW: Pershing has grown significant under your leadership from $30 billion to $130 billion or more. But it is still very much a distant fourth in total assets to its main competitors…or fifth if State Street gets counted. Is there anything that could get that growth into higher gear over time or will Pershing be content as a big niche player?

MT: We have a very high probability of doubling the business in the next two years. Our new relationships are $1 billion or larger. Pershing as a company has declared that the advisory market globally is the number one priority.

We recognize that many of our clients work with our competitors and we have great respect for them. We built this business as an alternative approach that doesn’t look like the other three firms. Our DNA is different, our technology is different, and our products and services are different.

Our service, technology, practice management and financial solutions are geared toward driving growth. If you talk to our sales people, they will tell you that there is not a more exciting custodian to work with. We are a practice management firm and view practice management not as a value added, but core to our value and don’t outsource to consultants. We are able to provide that level of support because we work with fewer, but larger firms.

T.W.: There continues to be talk that all the custodians may need to follow TD’s lead in exposing API for the greater advancement of technology. Has that been discussed here and could something be in the works?

MT: When you look at Pershing, we’ve been in the API business for many years. Our custody and clearing platforms have informed that strategy with a variety of apps and integrations. This is not new to us and is deeply entrenched in our DNA.

This is also one of the bigger and more frustrating myths out there. While some are talking about having 50 vendor integrations, we have over 250! In terms of advisor solutions on the technology front, we are deepening integrations with all types of vendors. Our clients drive that demand and we’ll integrate with anyone.

T.W.: Should RIAs presume that you’ll be around in your current position for the indefinite future or are you laying the groundwork for a succession?

MT: From the moment I started I laid the groundwork for succession. I would be a fool to think I am immortal, thus I practice what I preach. I will ride off into the sunset, but not until after INSITE (laughs).

Every year we go through a process and all of the senior executives have a plan, as it is the expectation of the company. BNY Mellon is one of the oldest financial services companies around and was one of the first listed stocks. Our founder died 225 years ago so we’ve successfully managed this issue.

TW: If the RIA business is at $3.5 trillion of assets today, where do you think it’ll stand in five and 10 years?

We think that it will double in assets. As a firm we process 25% of the world’s wealth every year. We can see where the assets are shifting and where clients are choosing to do business.

MT: The one area of concern is that there has been an abuse of language with everyone calling themselves an advisor or wealth manager. We need clarity of what an advisor truly is. The demand for a client advocate continues to grow. The transaction business won’t disappear because many people still prefer to pay as you go, however, there is a global movement toward a fiduciary model.

Timothy D. Welsh, CFP® is President and founder of Nexus Strategy LLC , a leading consulting firm to the wealth management industry, and can be reached at tim@nexus-strategy.com or on Twitter @NexusStrategy.