Hightower Advisors pairs 'Moss Adams' whip-crack training with latest (reported) $600 million Goldman Sachs-led capital raise to give organic, and inorganic, growth a better chance
ex-Mark Tibergien protégé, Philip Palaveev, designs failable two-year management program for Hightower advisors, using Fidelity G2 Leadership Institute as a template -- and his marathon career as the teachable metaphor
8 min read- Hightower secures reported $600M Goldman Sachs-led capital raise for M&A.
- Hightower pairs capital raise with Moss Adams-style training for organic growth.
- Palaveev, Salameh, and Oros will lead Hightower's advisor training program.
- Goldman Sachs' investment signals continued interest in the RIA space.
Brooke's Note: The cult of charisma and personality -- aside from capital formation -- is what defined the first 10- or 15-years of the rollup movement. Getting to an intial $20 billion of RIA AUM under one umbrella is an act of inculcating optimism in RIA owners and financiers alike -- and doing it all before the ether wears off. Rudy Adolf, Joe Duran and Elliot Weissbluth, sure. Ron Carson, Marty Bicknell and (in his own category,) Shirl Penney are a second trio unchallenged for power charm. But the rollup model is hard and so there is often little charisma or cash to spare at these firms to put an organic (attracting customers, not buying them) play into motion that stands up to the inorganic one. So it caught our eye when Hightower brought in Philip Palaveev -- an intellect with charisma -- and paired him with Abby Salameh and Bob Oros -- both of whom are pre-indoctrinated in his latter-day Moss Adams ways. Noted long-time rollup skeptic, Mark Tibergien (who has likened rollups to hedge funds that buy depleting oil wells) likes the training scheme's chances. The thing about business success is that it's both a sprint -- to get started -- then a marathon to keep hitting 6:50 miles and break the highly respectable three-hour mark. Energy, smarts, focus and a sense of humor needed.
Hightower Advisors just raised hundreds of millions of dollars to keep its M&A machine running full tilt, reports say, but it has also allocated a few precious dollars toward Moss Adams-pedigreed training to see if it can grow organically -- or at least organically deplete at a lesser rate.
The Chicago RIA and broker-dealer conscripted Philip Palaveev and paired him with two Hightower executives schooled in his Moss Adams ways -- Abby Salameh and CEO Bob Oros. Together, they'll gear training to helping the company's decentralized RIA managers to grow by running their own tight support ships.
Goldman Sachs, Neuberger Berman and Coller Capital this month ponied up as much as $800 million to fuel deals. (Goldman invested through GSAM, its investment management unit, one report says.)
Goldman Sachs' interest in the RIA space is intense. The New York firm bought RIA giant United Capital Financial Advisers in 2019 and RIA custodian Folio Financial earlier in 2020.
The three firms are collectively expected to invest $700 million to $800 million, said a source quoted in CityWire, who characterized the transaction as a passive investment. Buyouts Insider first reported the transaction.
The company reported earlier this month it will make its eighth purchase, Hart Financial Group, an $800 million RIA in Austin, Texas.
That marks $10.6 billion in deals this year, compared to $8 billion in all of 2019. See: After becoming a 'Zoom' maestro, Bob Oros spurred Hightower Advisors to close a $1-billion deal a week -- surpassing 2019's total in just over a month
RIABiz reported in February that Hightower Advisors was for sale, but the capital raise suggests principal owner Thomas H. Lee Partners is shifting its strategy. It now appears to be sitting tight and aiming to ramp up both organic and inorganic growth.
Hightower declined to comment when asked about this reported raise.
College experience
Palaveev is known for his success as a principal Moss Adams LLP, an accounting and consulting firm that was well-respected in the RIA industry for teaching advisors how to run their practices.
He knows his stuff, avoids cliches like the plague and mints metaphors with deadpan humor -- all laced with Bulgarian accent.
He left Moss Adams and formed Fusion Advisor Network in 2008 before selling it to National Financial Partners in 2012. See: What exactly is Fusion Advisor Network and who did it draw to Las Vegas last week?
Others rollups have tried to add a second growth engine by educating advisors on business management.
Former Moss Adams star begins to taste success in the 'real' world
In 2012, for example, Joe Duran, then CEO of United Capital, launched a university-like setting with a 20,000 square-foot center that featured an "Honest Conversations" lounge. See: United Capital's Joe Duran throttles back on deals as he opens an RIA version of Hamburger University
Now, Salameh and Oros are hoping Palaveev, who has led more than 200 RIAs through Boston-based Fidelity's G2 Leadership Institute, will have similar results building a college-like experience at Hightower.
Hightower CEO Bob Oros poached Salameh in May from a $22 billion LPL OSJ, in Morristown, N.J., to become chief marketing officer. See: New-look HighTower hires Abby Salameh and takes a 'Hurley-style' stake in a $4.8 billion DFA RIA
"It has been very successful," Oros says about the Fidelity program.
The Hightower program takes elements of the G2 program but incorporates Hightower’s own processes, procedures, operations and technology. See: Philip Palaveev writes the one RIA book worth reading this year
The key is that Palaveev energizes his students, says Salameh, who was a partner with Palaveev at Fusion Advisor Network.
"Not only is Philip brilliant, but he has a way of teaching that is magnetic."
Accountability, longevity
Palaveev, a marathon runner, knows that advisors are prone to lapses.
"Spending time and resources to train the next generation [of leaders] is almost never unsuccessful. It is a lot like going to the gym – even one visit is better than no visits at all."
But as all gym owners know, most people start out with intentions and don't make it back.
Story Timeline
New-look Hightower hires Abby Salameh and takes a 'Hurley-style' stake in a $4.8 billion DFA RIA
"Where we hope to make a difference is first of all continuity – the program lasts two years.
"Imagine committing to going to the gym regularly for two years. Chances are you will achieve a lot of your fitness goals. The accountability and longevity are built into the structure," he says.
Still, ramping up organic growth in a firm whose foundation has been growing inorganically is no small task.
Hightower had $56.7 billion of AUM at the end of July. Hightower's organic growth was 8% in 2018, Salameh says. In 2019, it hit 9.6%.
"We believe if we help our advisory businesses, we will have double-digit growth in an industry where most advisors are growing at low single-digit numbers.
What exactly is Fusion Advisor Network and who did it draw to Las Vegas last week
"This is not a pivot from our strategy at all, but one of the key pillars of our strategy," Salameh said in an email.
Meaningful impact
Mark Tibergien, who groomed Palaveev as his successor at Moss Adams, says Hightower's management training could be more than window dressing and may even alter how the industry perceives in-house training. See: Former Moss Adams star begins to taste success in the 'real' world
"If Hightower did not already have the great models of leadership that they currently have, and Philip didn’t have both the experience as a leader and developer of leaders that he has, I would not give its probability of success such high marks," he says.
"My prediction is that it will have a very meaningful impact in the firm, and serve as a helpful model for an industry that is confronted with dynamic transformation," he explains.
"Philip has an incredible track record of leadership accomplishments on his own. He emerged as a true thought leader in his early career in our consulting business at Moss Adams."
Incentive to learn
Hightower's voluntary program kicked off this month. Advisors are nominated by their founders or lead advisors and then approved by a council. Advisors aren't required to join the program.
"The incentive is to learn and become a strong leader. It is a privilege and an honor to be nominated as one of the next leaders of our organization.," Salameh says.
Participants who complete the program will receive a certificate from Hightower and failure is possible.
"There is accountability, transparency, and reporting throughout the two-year program to ensure adoption and engagement from the “students," Salameh says.
For instance, Oros says Palaveev will give the students monthly tests.
Plus, each month small groups are expected to produce one section of their business plan. "It is a simulated class where they each have their own business plan to run," Oros explains.
Appealing to prospects
While the program targets organic growth, Oros says it's quite possible that it could also help his company with inorganic growth.
"I am sure it is also appealing for prospective RIAs we are speaking to, knowing there is this program already built that will help their own next-gen of leaders assume the role in the firm when the time is right," he says.
Palaveev is taking some of the Fidelity G2 successes and using it with Hightower's leadership program.
"The G2 Leadership Institute has been a very successful program that has graduated over 200 professionals who uniformly report that they are more engaged and more successful in their careers.," he says.
The simulation creates a very realistic representation of what it is like to run an advisory firm."
But there's more than just continuity. Many individuals find success by partnering with others - whether it be on an app or in person.
Palaveev says this program involves a similar type of community.
"Runners say 'if you want to run fast – run alone. If you want to run far – run together.' The 40-plus professionals will support each other and learn from each other.
"They will act as accountability partners for each other and that makes a big difference."
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