Will HighTower be the next Raymond James?

Chief executive Elliott Weissbluth says adding new platforms will help the firm achieve a business model and scale comparable to that of Raymond James

May 6, 2014 @ 12:01 am

By Mason Braswell

+ Zoom

Fresh off of adding a new platform earlier this year, HighTower Advisors chief executive Elliott Weissbluth now compares the firm's growing reach to perhaps an unlikely rival — Raymond James Financial Inc.

HighTower launched its Alliance platform in early March. The fee-for-service offering allows firms such as credit unions or registered investment advisers to rent HighTower's compliance, back office and technology platforms.

The new platform, Mr. Weissbluth said in a recent exclusive interview with InvestmentNews, comes as the firm looks to build out from its current partnership model, which gives advisers an equity stake in the firm. HighTower currently has 38 teams who have signed on to the partnership model in what it has deemed top markets around the country, but the pace of hiring to that channel has slowed. The firm is not looking to bring in many newcomers to that model, Mr. Weissbluth said, as it shifts focus to building out other less capital-intensive sides of the business, including the Alliance and its franchise channel, the HighTower Network.

The most recent hire, an ex-Morgan Stanley team who previously managed $600 million in assets became the third team to sign onto the Network franchise as Gryphon Financial Partners.

(More: See Advisers on the Move for all of HighTower's latest hires)

With the Alliance platform, HighTower will be able to give advisers and teams more choice in how they affiliate with the firm and the amount of independence they have — similar to Raymond James, which has has about 6,200 advisers operating under employee, independent and hybrid models.

“Raymond James had a pretty good business model,” Mr. Weissbluth said. “They did a couple things differently than the way we handled them, but from an infrastructure perspective, a lot of what we're doing has similarities from the platform perspective.”

Mr. Weissbluth is the second prominent executive to single out Raymond James this year in the race for market share. RCS Capital Corp.'s Nicholas Schorsch also compared his firm's growth to Raymond James in January following the acquisition of Cetera Financial Group Inc.

A Raymond James spokeswoman, Anthea Penrose, said that executives declined to comment for this article.

Some critics initially speculated that HighTower's new Alliance platform would compete with its partnership model. Others said that opening HighTower's brand to a broader audience could make it seem less exclusive.

More from Mr. Weissbluth on HighTower's growth plans.

The new platform will help HighTower focus on a “different caliber” of advisers, according to Michael Parker, HighTower's national director. The first client on the platform, Gavion Investment Counseling, an institutional investment adviser with around $19.9 billion in assets under management, joined in March.

The Alliance platform enables HighTower to tap into smaller markets such as Memphis, Tenn., where Gavion is based, versus the larger metropolitan markets the partnership targets, according to Mr. Weissbluth. The models are also distinct enough that even if they were in the same locations, there are enough clients and prospects that they would not overlap, Mr. Weissbluth said. The new model also provides HighTower with a new source of assets as hiring into the partnership channel — currently with $25 billion in assets — slows.

“I don't worry about channel conflict or self-competition,” Mr. Weissbluth said. “Talk to us in a couple years when we have several hundred billion.”

Alois Pirker, a research director at financial services research and consulting firm Aite Group, said that the decision to branch out makes sense as a new source of revenue that would not require the firm to invest significant capital to make new acquisitions. The final outcome, however, remains to be seen, Mr. Pirker cautioned.

“It's probably too early to make a prediction,” he said. “But certainly once you have a platform built, why not rent it out?”

He said that offering several ways for advisers to affiliate with a firm was becoming a necessity as Raymond James, Focus Financial Partners, Dynasty Financial Partners and others already have similar offerings.

“Raymond James certainly has dominated the multichannel approach,” Mr. Pirker said. “That's clearly where HighTower is headed as well in that this is clearly not a monolithic model.”

Mr. Weissbluth intimated that the firm is also looking at adding offerings similar to Wealthfront Inc. or Betterment as a possible fourth leg to the HighTower platform in the next two years. Those online advice platforms, which also include Covestor and Jemstep, are ushering in the next phase of disruption in the brokerage industry, he said.

“I'm tipping my hat to you in terms of what's going on in our lab for coming out in two years,” Mr. Weissbluth said. He declined to elaborate whether the firm plans to build its own version of those platforms or make an acquisition.

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