As the big Wall Street wirehouses brush off their tarnished brands, breakaway broker firm, HighTower, is attracting brokers—and their assets—with the promise of greater independence and opportunities.
On Tuesday, HighTower announced it is growing its firm even further with $100 million in equity financing from Asset Management Finance.
HighTower, a Chicago-based, advisor-owned financial services firm serving high-net-worth clients with at least $100 million under management, started in May with a cushion of cash from Wall Street titans Philip Purcell and David Pottruck. HighTower has already attracted a slew of breakaway brokers, whose firms have been crushed by the financial meltdown, and are looking for an open-source, advisor-owned financial services company.
“HighTower's open-source model combines the best features of the registered investment advisor and an independent broker-dealer, with the capital and infrastructure to service advisors seeking an alternative to the wirehouse model,” said Elliot S. Weissbluth, HighTower's chief executive officer. “The open-source model pioneered by HighTower embraces multiple custodial and clearing firms, thus improving the quality of service and delivering better prices for our high net worth clients.”
Whereas other firms are structured to encourage advisors to sell their products first, the trend, said John McAvoy, president of AMF, in a press release, is for “preeminent advisors to seek platforms that provide open access to the best investment products from which they can offer clients uncompromised financial advice.”
Charles Schwab Corp. and Fidelity Investments are also targeting breakaway brokers. As of the third quarter of 2009, Schwab held $564 billion in assets for over 6,000 advisors, according to a Schwab spokesperson. During the first nine months of 2009, Schwab had 126 teams of brokers from major financial firms who had moved to its RIA custody platform, up from 123 in all of 2008.
Through the first 11 months of last year, Fidelity helped 185 brokers (individuals and teams) move to any one of the common independent models, including starting an independent registered investment advisor firm, join an existing RIA practice or an independent broker-dealer firm. Fidelity Institutional Wealth Services, the firm’s RIA custody unit, custodied more than $372 billion on behalf of 3,500 clients as of Sept. 30.