HighTower has withdrawn from the Protocol for Broker Recruiting Agreement, claiming its participation in the pact is unnecessary after foregoing its original partnership model to focus on serving other registered investment advisors.
The protocol, created in 2004, limits litigation among member firms that sign on and agree to a set of rules regarding their advisors leaving and joining another company. Smith Barney, Merrill Lynch and UBS created the agreement but today, more than 1,600 firms take part in it. But in 2017, some of the largest brokerages, including Morgan Stanley and UBS, no longer saw the benefits in participating and withdrew.
Absent the protocol's protection, firms are free to be more aggressive litigators and arbitrators—which makes it harder for advisors to leave and take clients with them. But the move to drop out of the agreement is not intended to be a retention strategy, HighTower CEO Bob Oros told WealthManagement.com. Remaining a part of the so-called protocol agreement “risked confusion that maybe we were something that we’re not,” Oros said. It made more sense to be a part of the agreement when the firm was lifting teams out of the wirehouse world.
“When RIAs are making a decision to do a deal with HighTower, they are coming onto our [Form ADV], and they are taking advantage of our HR, finance, compliance, and our core infrastructure, and they are making a decision to be part of the firm for the long term,” Oros said.
Advisors who aren't interested in being part of HighTower simply wouldn't be a part of it, he said; in other words, it's not a captive environment for advisors, the way it is for those working in a wirehouse. “There isn’t an exit to be had,” Oros said.
Oros, the former CEO of the Blucora-owned broker/dealer HD Vest, joined HighTower as its new CEO in January. Since then, the firm has shifted to focus solely on providing capital and support services to RIAs and filled out its executive ranks. Among others, the RIA hired Private Advisor Group’s Abby Salameh as its new chief marketing officer.
Elliot Weissbluth, who stepped down as CEO to become chairman of the Chicago-based firm’s board, founded HighTower in 2007 as a turnkey landing place for so-called wirehouse brokers. Most of those who joined became partners in the firm and, if they chose, could pick up and leave.