Press
Advisory Firms Caught Between a Rock and a Good Place
SEATTLE, Wash. (Sept. 10, 2007)—The advisory profession has a good but challenging problem on its hands: It is caught between an influx of new clients and a shortage of talented staff. For firms to continue to grow, they will need a value proposition to attract, retain, and develop talent, according to the recently released 13th edition of the 2007 Moss Adams LLP Compensation and Staffing Study of Advisory Firms.
“The consequences are twofold,” said Philip Palaveev, principal of Moss Adams. “We see rising revenue on the one hand, and a corresponding rise in compensation levels on the other.” As firms grew, they steadily added staff, creating intense competition for talent. Over the past five years, firms participating in Moss Adams’ annual studies saw their staff count more than double. To keep pace with rising demand, 37% of firms surveyed said they expect to add a professional in 2007.
Last year, Moss Adams found evidence of “growing pains” in the form of margin pressure and the highest levels of overhead expense seen in years. In contrast, this year’s data show that many firms are already seeing a positive return on these investments in the form of lower overhead expenses as a percent of revenue, stronger operating margins, and higher productivity—and higher owner incomes as a result.
Palaveev commends the profession for responding well to the pressures of growth but cautions owners against failing to prepare for the continuing wave of new clients. “As firms grow, they reach critical points where investments in the business are needed in order to take advantage of opportunities as they present themselves, not afterward,” he said.
Included in the 2007 edition are specific suggestions designed to benefit any practice no matter where it is in the practice life cycle. The study also addresses compensation and staffing issues common to each of the five evolutionary stages of advisory firms, from early solo to market dominator.
“The focus for early solos is on growing their businesses, and in many cases, they are making staffing decisions for the first time,” said Palaveev. “If they choose to evolve beyond the one-person shop, once they get to the mature solo stage, their challenge is to create an organizational structure that fully allows them to leverage their professional time.”
Ensemble firms, which boast multiple professionals but gross less than $2 million in revenue, should work to create attractive career paths and ownership opportunities, and as they grow, focus on improving efficiency and management. At the market dominator stage, multiple dedicated management positions emerge, and 88% expect to hire this year. More firms at this level employ incentive compensation structures as well. “Staffing and compensation practices play a significant role in a firm’s development,” said Palaveev. “The largest and most profitable firms seem to know this and are looking to further increase in size and profits.”
The study is seen across the industry as a vital practice management tool. SEI Advisor Network and JPMorgan Asset Management were this year’s sponsors. “In such a rapidly changing industry, SEI owes it to our advisors to help them be as successful as possible,” explains Wayne Withrow, executive vice president of SEI. “Supporting this study for the past seven years has helped advisors respond to current challenges, to stay ahead of future trends and to give them the tools to grow.”
Adds Sharon Weinberg, a managing director at JPMorgan, “JPMorgan’s sponsorship both this year and last is consistent with our commitment to helping advisory firms understand how to realize lasting success.”
Investment Advisor magazine, Moss Adams’ media partner, will highlight the study in its October issue.
Purchase the 2007 Moss Adams LLP Compensation and Staffing Study of Advisory Firms for $250.
Press Contacts
Amy Esary
2200 Rimland Drive
Suite 300
Bellingham, WA 98226
Phone: 360-676-1920
Fax: 360-671-5411
Send Amy an e-mail
Events
Moss Adams LLP is the 11th largest accounting and consulting firm in the United States and the largest firm headquartered in the West. Moss Adams LLP has two affiliated companies, over 250 partners and 1,600 employees, and is focused on providing client service to public, private, and not-for-profit enterprises through specialized industry and service practice teams.
