When Philip Palaveev says he's going to look into the proverbial crystal ball, he doesn't waste time. The Moss Adams and Fusion Advisor Network alum who recently started The Ensemble Practice provided a look at the future right off the bat during his presentation at the FSI OneVoice Conference in San Diego on Tuesday afternoon. First, however, he poked fun at himself and the consulting business,"I don't have a crystal ball, but I do have a suitcase; that's all a consultant needs."
Titled "The Crystal Ball View of the Independent Space," the presentation made the following arguments as to where the financial advisory industry is headed:
- Few firms will dominate and many will prosper—the industry will segment itself around markets with firm size matching client size
- Technology eliminates the basic and the routine and creates thriving market for complexity—basic advice will be commoditized and replaced by technology. Complexity will always be of very high value
- We are running out of large firms—we just are
- Consolidating competition—The most enduring and powerful consolidators are the organic ones
- The next generation is not a succession issue—it is a leverage issue
- Advisor ownership–ownership will always be a trump card
- Culture eats strategy for breakfast
Palaveev (left) said the future of the advisory industry is the past of the accounting industry, noting similarities to the later in how the former will mature.
"In the accounting industry, firm size and competitive behavior mirror client size," he noted. The 'big four' service Fortune 1000 clients,large regionals firms service large privately owned companies and small public companies, midsize firms service private and small businesses, and solo practices service tax and micro-businesses."
Palaveev added that consolidation continues at slow but steady pace and roll-up efforts, something the RIA industry is now experiencing, died down long ago with accounting firms.
"Partner income is high throughout the industry and stable," he said. The 2010 National Management of an Accounting Practice Survey found it to average $273,140, and valuations are lower than in the 1990s."
