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HighTower dangles array of hedge funds to lure breakaways

Wirehouses have nothing on independents when it comes to access to hedge funds, firm says citing three-year study

Thursday, June 23, 2011 – 2:39 PM by Lisa Shidler
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Elliot Weissbluth: I can tell [advisors] life is better for you outside of the wirehouse and I didn’t know this fact three years ago.

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Mentioned in this article:

Envestnet Inc
Top Executive: Jud Bergman

Paul Spitzer

Paul Spitzer

June 23, 2011 — 3:28 PM

Is there different pricing for the RIA channel? I always thought that a good percentage of the 2/20 approach went back to the B/D.

Lisa Shidler

Lisa Shidler

June 23, 2011 — 3:56 PM

Hey Paul, That’s a great question. Eliott wouldn’t get into specifics of the costs, but did say the cost in the wirehouse arena is about the same as it would cost in the independent channel.

Paul Spitzer

Paul Spitzer

June 23, 2011 — 4:00 PM

So it sounds like it’s the same old 'pay to play’ arrangement that kicks back soft dollars to the B/D. It would be great to offer clients a solution without the conflicts of interest.

Elmer Rich III

Elmer Rich III

July 1, 2011 — 4:27 PM

Interesting marketing case study. So: – 7% of assets of are in alternatives – Yet, a majority of the differentiation presentation is around access to what will likely be only < 10% of a client’s allocation and not anything close to a the core investments. So effectively 90% of the strategic differentiation presentation is based on < 10% of the AUM potential. A revised Pareto Principal (80/20).

We are going to propose that the logic behind this strategy is driven by: – Advisors client retention fears – The belief that alternatives are necessary for client retention – Because alternatives are mainly understood by clients, and perhaps advisors, as being a “safe” alternative to protect them from the recently experienced severe drops.

However, we have to consider these hard realities: – Alternatives are diverse kinds of investments – None are guaranteed to avoid losses, to the contrary – The only thing that goes up in a down market is correlations among investment vehicles

So are advisors serving themselves and their clients with a rush to alternatives or just reacting to recent traumatic experiences — like their clients? Worthwhile question to ask.

Paul Spitzer

Paul Spitzer

July 5, 2011 — 1:26 PM

Your comments are well thought out. I think A.I. is a reasonable asset class to consider having exposure to… my comment was more towards the lack of transparency regarding the fees. As an RIA I must try to find my client the best possible pricing available and it doesn’t appear the HT model is any different from a wirehouse offering.

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