When 1,300 advisors converged on Hollywood, Fla. last week for Pershing Advisor Solution’s annual INSITE conference, it was amid a slew of interesting developments for the high-end custodian, which reports average advisor assets of $220 million. Last month Pershing said it was combining its bank and brokerage custody with parent firm BNY Mellon, a merged operation that would be led by Pershing Advisor Solutions’ CEO Mark Tibergien (marking his sixth year with Pershing this fall). The move boosts Pershing’s AUM to $116 billion and its RIA count to more than 540. Pershing also unveiled its latest mobile app, announcing it would be in full release later this year for the iPhone and iPad, followed by versions for Android and Microsoft. Tibergien talked in Hollywood with Jerry Gleeson, community manager at Finect,the social media site for financial advisors (and a former senior editor at WealthManagement.com), about his expectations for the custody merger with BNY, what advisors are telling him about technology, and who he’s following on Twitter these days. Here’s a condensed version of the interview.

 

WealthManagment.com: What’s the rationale for merging Pershing and BNY Mellon custody?

Mark Tibergien: A large number of advisors in the high-net-worth and ultra-high-net-worth market had clients that used both a bank custodian and a brokerage custodian. A bank custodian is typically used for trusts, for foundations, for multi-generational situations, or by client perceptions that a bank is safer than a broker firm. A brokerage custodian is used because of efficiency, help with practice management, typically more innovative technology, trading and execution.

It’s not uncommon for an advisor to have a client with, say, four accounts on the brokerage side and one or two accounts on the bank side, but they’re the same client. You can see the inefficiencies that can come from that. There’s a difference between the mass affluent and the wealthy. The mass affluent’s goal is, how do I retire? In the case of the wealthy, they’re already rich, so the question is, how do I leverage my assets or my wealth in a way that produces a better return and fulfills other goals, like philanthropic goals? The question then was how could we allow for those clients to stay invested but give them access to capital in the form of jumbo mortgages or investment credit lines.

Pershing was acquired by the Bank of New York, and several years ago Bank of New York and Mellon Bank merged. As they went through all the decisions about how to merge all those entities, one of the things that changed was going from a product silo mentality to being organized around the client. Once the merger was in place, then Gerald Hassell, our CEO, said, OK everybody, let’s take a look at all these divisions that are touching the same type of client and let’s see where we can get some efficiencies. Well, we wanted to be in that deal because we saw the bank custody that was pursuing RIAs, and we were pursuing RIAs.

 

How did that change your AUM?

The AUM on the bank side was about $30 billion, but we are only taking over about $15 billion because we wanted to stay pure in servicing the RIAs. The other assets that we didn’t take are tied to single-family offices or wealthy individual clients which we don’t deal with.

There are certain opportunities now in the pipeline that would probably raise that asset value even higher. We’re on the radar screen more for the billion dollar firms than we ever were before.

 

What’s the long-term strategy of the consolidation?

Prior to this we were working simpatico where we were referring each other, but we were separately managed. Now that we’re managed under one roof, the first thing that we’re working on is service. All of our account managers have cross- training. When you’re an advisor, regardless of which platform picked, bank or brokerage, you’re going to get the exact same service. There is also some common technology but the big investment will be harmonizing all of the technologies.

 

How long will that take?

A couple years. We continue to invest in our NetX360; that will be the platform that we will be driving this business with. And then we have to add some components like some trust capabilities.

 

What’s the early reaction from Pershing advisors?

Tremendous. We did a soft launch about five or six weeks ago. Within the first two weeks we converted about 25 accounts with about a billion dollars of assets from existing advisors who were holding assets away at some other bank.

 

Does the consolidation involve issues of different corporate cultures?

Remember we are Bank of New York, so we’re already in the culture. The only reason Pershing is Pershing is because we have our own brand, but we are a BNY Mellon company. We have the same payroll system, the same email system, same promotion process, so this isn’t as complex.

 

How important was branding under Pershing Advisor Solutions?

The Pershing name has a great deal of resonance in the advisory business but so does BNY Mellon. But having Pershing Advisor Solutions as the dominant brand probably made the most sense because we are more visible in the RIA world.

 

What metric would indicate you’re succeeding? Do you have a target AUM five years out?

I would say we probably want to be in the $200-to-$250 billion range. Our growth strategy is a little different; we’re adding 80 to 90 new relationships a year. We think we can digest that. Remember, there are 28,000 registered investment advisor firms in the U.S. There are only 3,000 that we’re interested in working with. So we’re not pursing the whole market, we’re pursing a very defined type of client. Our minimum AUM’s $100 million.

 

How many Pershing RIAs are using the mobile platform now?

We probably have 300 users now. I wouldn’t mind adding another 600 quickly, right after this conference. There’s a lot of interest, everybody knows mobile technology is where you have to go, so we’re investing heavily in it. Our total technology budget is $350 million a year. Frankly, mobile is the least expensive part of the investment.  But it’s part of what we’re approaching, to make it available not just on iPhone but the Android and Windows phones.

 

The big challenge is more adoption. We think we’ve given it more of a retail look and feel, so it’s easier to access now. In fact, if you downloaded the INSITE app onto your iPad or smartphone, you can go on a banner and find NetX360 right there to download.

 

What are Pershing advisors telling you about what they want in technology?

What advisors are saying is, it isn’t more technology, it’s greater adoption of what they already have. They want better training, and open choice in terms of the applications. Right now we have 200 vendors that we’ve integrated into NetX360 that are outside of the firm, which is huge.

 

What’s blocking greater adoption from happening?

It’s more their time and commitment to it. Any time you’re learning a new system there’s a level of complexity. I would use the parallel in your own life. If you look at your computer, how much of it do you use? If you have a smartphone, how much of it do you use? An iPhone has 300,000 apps.

 

What are advisors’ clients telling them about social media?

Social media is important in the sense that this will be how clients and advisors create community and communicate on things. I think the use of social media has probably been a little primitive, limited to marketing, not to relationship building or information. I think what we’re finding is, as advisors move from the boomer generation to the millennials and Gen Y, there is easier adoption of the concept of social media. I wouldn’t say the clients are saying, I wish you had a Facebook account or a Twitter account.  I think what they’re saying is, they don’t know how their advisor will use it. I think advisors are trying to figure out different ways to create community and greater linkages around what they’re doing.

 

So advisors are not getting pressure from clients to use social media more?

Sometimes the clients don’t know what they don’t know. The real move toward social media is driven by the advisors, not by the clients. You just have to recognize this, as the next generations evolve, then certainly we’re going to have to be conscious about how people interact with each other.

 

What are you hearing from advisors about their social media needs?

Are they still trying to get their arms around it?

I think that’s probably true. A lot’s been written about the subject. You have the combination of regulatory restrictions and a lack of knowledge about how to best poise social media. So I think it’s a frontier that hasn’t quite been fully converted into a business model yet.

 

Does Pershing feel it needs expertise in this?

We do, we have, and we’re supporting our advisor growth in social media to the extent that they can. We’re doing things on white papers and webcasts and introducing ideas around best practices. It’s more of a suggestion phase than it is organizing communities. Pershing has a Twitter account.

 

Do you Tweet?

I don’t because of the regulatory restrictions as a FINRA broker/dealer. I have a Twitter account. I follow maybe 40 people, everyone from Michael Kitces to Sarah Silverman.