From the August 2009 issue of Investment Advisor • Subscribe!

Editor's Note: Change Partners

"These great Wall Street firms survived the Depression," pointed out Tom Bradley, "yet they couldn't survive this. Maybe it's because back then they were partnerships." Bradley, the plain-speaking president of TD Ameritrade Institutional, was discussing how the competitive landscape had shifted over the past 18 months, but his point about partnerships was well taken. In fact, that's one of the main arguments that convinced a number of Wall Street's best and brightest to sign on the dotted line with HighTower Advisors, a Chicago-based RIA firm that's attracted--they don't do recruiting, CEO Elliot Weissbluth says pointedly--some of the leading advisors from Morgan Stanley, Goldman Sachs, Merrill Lynch, even the odd already-independent RIA, to the HighTower fold (see cover story page 32). I use the term "advisors" advisedly, since these are wirehouse brokers that in many ways were already acting independentl, but felt the chafing of being force-fed product and the embarrassment of being associated with firms that, surprise, put the benefits of top executives far above the needs of their clients. These are men and women lusted after by not only their current and former employers, but by everyone else as well during this time of money in motion--RIAs looking to quickly build scale, custodians looking for a boost in their assets under custody, independent broker/dealers eager to recruit such blue-chippers.

Bradley told me on July 8 that TD was engaged in talks with wirehouse brokers representing some $10 billion in assets, and that some 30 or 40 RIAs affiliated with TD were interested in acquiring those assets (see news story page 22).

Like those advisors, the HighTower model is taking advantage of the economic and markets crisis to not only retain current clients but to gain new clients by--surprise--servicing the hell out of current clients and investing for the future by implementing the best technology (see the second in our two-part series on leveraging technology on page 44). Michael Bapis, the HighTower advisor and ex-Morgan Stanley broker who graces our cover, and his new partners interviewed for the cover story report that their clients, almost without exception, supported their advisors' move from the big firms by voting with their assets and following them to their new home. The fact that HighTower is multi-custodian and multi-clearing helps the advisor but also the client, Bapis says, especially when it comes to product and pricing and service.

A plausible argument could be made that the entire mortgage mess was only made possible because even in a public company the executives are not risking their own money when they make business decisions. In a partnership, by contrast, it is you and your partner's capital that is at risk. But independent advisors already understand that, since every day it's you and your reputation that is on the line with those who count the most--your clients. I hope Washington pays attention to that dynamic while the politicians and regulators re-regulate financial services.

One of the benefits of upheavals like the current one is that it forces people to reassess their business models and, sometimes, invent new ones that can be game changers. HighTower could be one of those game changers, or perhaps you could build your own. Now's the time.

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