August 6, 2010

Weekend Interview: HighTower's Weissbluth Contemplates Why Brokers Are Like Butchers

Fiduciary responsibility for brokers? "A change of regulation can't convert butchers into dietitians"

Since its founding in 2008, HighTower Advisors has expanded at a brisk pace--with 15 new partnerships and counting, many of them from breakaway wirehouse advisors from New York, California and, of course, Chicago, where HighTower is headquartered.

Chicago, according to poet Carl Sandburg, is the city of big shoulders, hog butcher for the world, "with lifted head singing so proud to be alive and coarse and strong and cunning." These are words that may not sit well with Wall Street firms-- UBS, Merrill Lynch, Morgan Stanley, Bear Stearns/JPMorgan, and Goldman Sachs among them--that have seen advisory teams and wealth management units depleted as their talent breaks away to join HighTower.

Perhaps unsurprisingly, considering HighTower's phenomenal growth, the firm has been the subject of lawsuits. Morgan Stanley Smith Barney sued HighTower in February, accusing it of stealing advisors and clients. And one of the firm's advisors, Curtis Lyman, formerly of Lehman Brothers, was sued this spring by investors in Florida for investing their money in an alleged Ponzi scheme run as a feeder fund by a disbarred lawyer sentenced in June to 50 years in jail.

HighTower CEO Elliot Weissbluth in an April 1 interview with Reuters gave his "unreserved" support to Lyman, saying, "Curt Lyman is as much a victim as the other Ponzi scheme victims." More recently, when asked for an update, Weissbluth said that in the time that has passed, everything new he has learned since April 1 only makes his comments to Reuters more relevant.

"These investments, initiated prior to Curt Lyman joining HighTower, were made in a fee account," Weissbluth said in a statement. "Mr. Lyman did not have any economic interest whatsoever in placing these funds with the feeder fund."

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