Top management reboot at HighTower as PE owners assert control
HighTower Advisors, now under the firm control of private equity firm Thomas H. Lee Partners, is rebooting its top management team.
Lee Partners, which bought a majority ownership in HighTower last year, is looking to put its own stamp on the RIA — and insure a satisfactory return on its $450 million investment — as the independent market moves into a new era following the well-received IPO of Focus Financial Partners last month.
The trailblazing RIA, which made its mark by providing a platform for breakaway wirehouse brokers, is looking for a new CEO to replace co-founder Elliot Weissbluth.
Lee Partners saw "a changing of the guard as advantageous," says industry consultant Jamie McLaughlin.
"Elliott had a vision and took it as far as he could," McLaughlin says. "Now there may need to be a resetting of the vision. There is also a need for much better execution to achieve the outcome expected in [Lee Partners] investment."
Weissbluth will become chairman when a new CEO is found. Current chairman Gurinder Ahluwalia, an executive advisor to Lee Partners and former CEO of AssetMark, who replaced David Pottruck as chairman in April, will become the company's lead director.
HighTower, which has over $42 billion in assets under management, is also looking for a new president and an executive to head its field services. Last month the RIA hired Marc Cabezas from Edelman Financial Services to head its M&A efforts.
Asked if his move from CEO to chairman was voluntary, Weissbluth replies that it was part of a "collaborative conversation" within the firm to best position the RIA for future growth.
"We've been looking to expand the leadership team for the past year," Weissbluth says. "We want the right team on the field to take advantage of the market opportunities."
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HighTower's private equity owners "may have had a different perspective about the future," says United Capital CEO Joe Duran. "It's certainly a completely different environment now than a decade ago when we all got started."
As a fellow RIA trailblazer, Duran says he has "nothing but admiration" for Weissbluth. "I know what it takes to start a company and make it as substantial as HighTower has become. As someone who has built and sold a financial services firm in the past, I know the transition can be peculiar, but I'm sure he'll have an active role going forward."
Weissbluth says he plans to remain actively involved in the business, focusing on M&A, branding and communications.
Indeed, acquiring RIAs will be HighTower's priority in the coming months, Weissbluth says.
Less than two percent of assets held by independent advisors are controlled by consolidators, he pointed out. As assets continue to leave wirehouses and advisory owners get older, buying up firms is HighTower's "greatest opportunity to add value," he says.
Focus' IPO may have been a catalyst for HighTower's management shakeup, says analyst Alois Pirker.
Aggregating RIAs is, of course, the business model that propelled Focus Financial Partners to a successful IPO last month. Some industry observers felt the timing of the HighTower executive shuffle wasn't a coincidence.
"Both Hightower and Focus were private equity backed and seeking a public offering," says Brooks Hamner, vice president at Mercer Capital, a Memphis-based business valuation firm specializing in wealth and asset managers. "Focus got it together, and Hightower did not. This recent move suggests that HighTower shareholders had finally had enough following widespread reports of RIA team defections, rising attrition rates, and key personnel departures. The Focus IPO was probably the last straw."
Aite Group's research director Alois Pirker says he also believes Focus Financial’s IPO "acted as a catalyst" for the HighTower moves.
"Lee Partners has put itself into a horse race against KKR [the PE firm that bought a majority stake in Focus] and needs to produce now," Pirker says. "Elliot has done a fantastic job creating a leading RIA aggregator platform and I am sure will continue to direct strategy. But Lee is probably looking for an experienced executive who can safely sail the HighTower ship into the IPO harbor."
The Focus IPO "validated the credibility of national RIA firms and the importance of a fiduciary and a scaled RIA," Weissbluth says.
Asked if HighTower is considering an IPO, Weissbluth replies that as an industry leader the firm "looks forward to continued validation" of the national RIA model emphasizing size, scale and sophistication.
As for a HighTower IPO, "check back in a couple of years," Weissbluth says. For now, the company "is intently focused on growing the business," he says.