HighTower Focuses on Indie Business Channel Growth
HighTower is “focused” on building its independent business owner channel, the “fastest growing” group of advisors within the company, says Kimberly Papedis, the company’s Chicago-based head of national sales and platform strategy.
Papedis says HighTower’s independent business owner model, which was launched in 2013, helped quadruple the company’s client assets over the past four years to $46 billion.
HighTower is targeting $35 million in revenues from new independent business owners joining the company this year, she says, adding it already achieved more than $29 million of that full-year target by the end of May. She declines to disclose revenue targets for the entire business.
When HighTower was founded in 2007, the goal was to attract successful broker-dealer advisors who were contemplating breaking free from the control of wirehouses, Papedis says. In the partnership model, advisors join HighTower as “employees” in exchange for both equity and cash. That partnership model still exists and is still attracting advisors, but the independent business owner is a larger market for HighTower, she says.
“We built out our platform with the partners that came on board in the early stages. That allowed us to attract advisors who wanted to go fully independent,” Papedis says.
In the independent business owner model, advisors join HighTower as “affiliates” and pay a platform fee that’s on a sliding scale of 10% to 17% of their annual revenue; the higher the revenue, the lower the percentage charged, Papedis says. These affiliates fully integrate into HighTower’s culture, brand and platform, and they benefit from the size, scale and sophistication of a large national advisory company, she adds.
Around half the advisors HighTower is in talks with as potential future partners are currently with wirehouses, while half are either independent business owners or independent advisors affiliated with broker-dealers, she says.
HighTower now has 77 advisor teams – 25 are independent business owners and the rest are partners. More than 190 advisors make up those teams. HighTower is now present in 28 states in the U.S., with headquarters in Chicago and corporate offices in New York and San Francisco.
Papedis says HighTower’s partner advisors appreciate the independence they didn’t have in their previous broker-dealer firms. She claims they are unencumbered by sales quotas, the pressure to sell proprietary products or specific third-party products, and the reputational risks linked with working for big Wall Street financial institutions. She notes HighTower has no in-house products to sell to clients, claiming this removes any potential conflicts of interest associated with that sales practice. Almost all the client accounts of HighTower’s advisors are in fee-based accounts, which is the arrangement the company asserts is best for the client, she adds.
Independent business owners apparently prefer to retain control of their businesses and pay for HighTower’s services rather than become partners, Papedis says.
HighTower provides all its advisors with support for operations, compliance, technology, practice management, investment research and due diligence, marketing, public relations and other areas of the business, according to the needs of each advisor team. All of those are available to advisors to use as much or as little as they prefer.
“We have a team called the advisor growth group that is focused on working with advisors to maximize their P&L and put in place best practices,” she says.
HighTower takes on new independent business owners that have a minimum annual revenue of $1 million, Papedis says. So far the average annual revenue of the independent business owners on its platform is around $2 million to $2.5 million, she claims.
One of the first things HighTower assesses when considering taking on new independent business owners as affiliates is whether their corporate culture will fit with HighTower. From its launch, HighTower has acted as a fiduciary and expects every advisor joining the company to do the same, Papedis says. The advisor must “fall in line” with HighTower’s founding principle of being a fiduciary, she says.
From there, HighTower assesses the advisors’ investment processes, methods for gaining new clients, views and actions on fiduciary responsibility, as well as future goals for the growth of their practice.