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HighTower throws open its doors to non-partner firms who want service and/or brand

The Chicago-based consolidator announces in Las Vegas that it is gambling that it can deliver a business model similar to Dynasty Financial Partners

Author Brooke Southall September 14, 2012 at 4:33 AM
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Elliot Weissbluth wowed the MarketCounsel crowd in Las Vegas with the news that HighTower will take on Dynasty Financial head-to-head

Stephen Winks

Stephen Winks

September 14, 2012 — 3:55 PM

The operating leverage Elliot has created is extraordinary. There are owners who are greatly leveraged by affiliated users.

Raymond James created the first such business model when Tony Greene spun out of FSC to create the independent broker/dealer arm (IM&R) of Raymond James, the then small Florida traditional (brokers as employees) brokerage firm. Two firms utilizing the same support infrastructure generated margins and sophistication not possible by either. Though Raymond James was not your fathers traditional broker/dealer, HighTower is not the typical Advisory support firm in vision, scale and ability to execute. It is the first large scale advisory services support organization for equity partners who have skin in the game and a very large user base who presently do not have access to the enabling, expert prudent investment processes, advanced technology, work flow management, conflict management and expert advisory services support required for fiduciary standing that are modernity to an antiquated brokerage format.

Elliot knows something that scares Wall Street to death, he understrands that he can make expert fiduciary standing safe, scalable, easy to execute and manage as a high margin business at the advisor level at a lower cost than a packaged product. Importantly Wall Street can not respond in kind because of its expensive outdated business model and becomes a high cost low value added alternative to advisory services in the consumer’s best interest.

The good news for Wall Street is HighTower is not there yet, but firms like Dynasty, EnvestNet and others are highly motivated to advance (a) expert authenticated prudent investment processes that make fiduciary standing safe to acknowledge, (b) advanced technology and approaches to portfolio construction which provide transparency and continuous comprehensive counsel required for fiduciary standing, (c) work flow management tied to a functional division of labor (Advisor, CIO, CAO) which makes advice scalable, easy to manage and execute as a high margin business at the advisor level, (d) conflicts of interestr management essential to fiduciary standing not possible in a brokerage format, and (e) expert advisory services support for each of the ten major market segments advisors serve (Mass, Retail, HNW, Ultra HNW, DC, DB, Foundations and Endowments, Taft-Hartley, Public Funds, Profit Sharing Plans). None of these things are possible in a brokerage format and represent modernity—in the best interest of the investing public long thwarted by brokerage self interests.

Elliot Weissbluth’s announcement is a catalyst for large scale institutionalized support advisory services both within the brokerage industry and outside, and is driven by the desire of brokers and advisors alike to act in their client’s best interests. The client’s best interest will be served, based on objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters. This is an all or nothing value proposition as incremental solutions do not innoculate HighTower or its owners from fiduciary liability. Thus advisor ownership and control becomes a decisive advantage, not enjoyed by brokerage self interests, which makes it almost impossible for brokerage firms to respond.

The only question is does Dynasty or EnvestNet, or others have the know how to take advantage of the opportunity the marketplace has presented them. This is not an extrapolation of the brokerage model that is built to assure no advice is being rendered, so fiduciary responsibiliy is not triggered. Advice is not a product the broker sells but an expert prudent process the advisor manages in the client’s best intererst.

HighTower and Dynasty combined have $100 billion in assets, add EnvestNet at $140 billion and you have the mandate, the capital and the leadership to execute. It is just a question of know how.

Expert personalized fiduciary advice in the client’s best interest at a lower cost than a packaged product wins every time relative to outdated, high cost, conflicted advice of the brokerage format.

I think Elliot is on to something !


Jeff Spears

Jeff Spears

September 14, 2012 — 4:08 PM

One other reason this is a smart move for HighTower is this “new” structure is much more attractive for large breakaway teams that don’t want to sell their business to a roll-up firm.

Was this structure Dynasty’s idea?

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Mentioned in this article:

MarketCounsel | HamburgerLaw
Compliance Expert, RIA Set-up Firm, Regulatory Consultant
Top Executive: Brian Hamburger

DeVoe & Company
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Top Executive: David DeVoe

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