While Chicago-headquartered Hightower’s core strategy continues to be acquiring standalone registered investment advisors, the firm has recently made a foray into the independent broker/dealer channel, and CEO Bob Oros expects it to be a complementary area of growth for the firm going forward. The move would certainly expand the universe of potential acquisitions.
Just this week, Hightower announced it was taking a stake in Siller & Cohen Family Wealth Advisors, a Rye Brook, N.Y.-based hybrid RIA with $830 million in client assets, which was previously affiliated with Lincoln Financial Advisors. In October, the firm made an investment in Austin-based Hart Financial Group, a hybrid firm previously affiliated with MML Investors Services, MassMutual’s IBD.
“We’ve done a couple of [deals with IBD advisors] now, and feel like we really understand the process for doing those,” Oros said in an interview with WealthManagement.com. “We’re optimistic that this will be an area of opportunity going forward, with really good advisors who are growing and just doing it in a slightly different way.”
Hightower’s strategy has been to buy high-quality advisory firms that are focused on growth. Many of the advisor practices that sit inside IBDs are of equivalent quality to those that Hightower has targeted on the RIA side, Oros said.
“There’s a lot of gold in the hills, if you will,” said Louis Diamond, president of Diamond Consultants. “At most of the major broker/dealers, there’s a number of outstanding practices, and those practices struggle with the same things an RIA does, which is succession planning, which is scale, which is offloading some day-to-day responsibilities, and a firm like Hightower could be an ideal fit to remedy that.”
The IBD practices that Hightower takes stakes in come under its ADV and operate any legacy brokerage business through its broker/dealer, Hightower Securities. The deal is structured the same way an RIA acquisition would be; the only difference being that they’re sitting under a corporate ADV with a clearing firm, rather than their own.
“There’s a bit more upfront work because we’re going to repaper all those accounts, whereas in the typical acquisition we don’t have to,” Oros said.
Diamond added Hightower could be a good home for IBD practices, as it enables advisors to retain more control than some of the roll-up firms.
“With Hightower, they let the advisor keep his brand, keep his client service model, really keep doing what they’ve been doing, just with a little more scale and support,” he said. “Advisors that have been independent their whole careers aren’t necessarily willing or excited to give up a lot of their uniqueness and day-to-day control. That’s why I think Hightower is uniquely positioned to capture some IBD practices. They’re not going to go in and change everything, like some buyers would.”
Hightower is not the only firm in the RIA space buying up IBD practices. In April, Allworth Financial bought Houston Asset Management, a hybrid firm previously affiliated with SagePoint Financial. Last May, the firm acquired Capstone Capital, which was previously with Commonwealth Financial Network. Last December, Allworth acquired Bastoni Financial Services, a firm previously affiliated with Securities America.
Jonathan Henschen, president of the recruiting firm Henschen & Associates in Marine on St. Croix, Minn., says Hightower can offer reps at insurance b/ds an environment focused more on wealth planning, rather than insurance. The firm could also help Certified Financial Planners better adhere to a fiduciary standard.
“As wealth management increasingly becomes a need with clients, advisors feel mismatched being with a firm that keeps pushing their primary profit center, insurance,” Henschen said. “For CFPs trying to uphold to a fiduciary standard, I can see [the insurance b/d] environment being a conflict of interest as they seek out not only wealth management but more choices and better pricing value.”