January 11, 2011

HighTower ‘Tucks In’ a Morgan Stanley Broker to Existing RIA Firm

Steve Bogner to join HighTower's New York practice led by Richard Saperstein

HighTower, the Chicago-based firm that has attracted a raft of brokerage teams from major wirehouses to partner under its RIA umbrella, announced Monday that it had completed its first tuck-in transaction, under which an individual advisor has agreed to join one of its existing partner firms.

Steve Bogner, who had spent 11 years as a broker with Morgan Stanley Smith Barney Private Wealth Management in New York and had $80 million in AUM, has joined the HighTower practice in New York led by Richard Saperstein.

Saperstein is one of the most prominent brokers to have become a partner at HighTower, which he did in 2009 from JP Morgan; in addition to running the New York practice, he now sits on the HighTower board.

HighTower’s standard approach is to bring in a wirehouse team looking for the benefits of independence and partnership, as it did with Saperstein and with a five-member UBS team in August, and as it did with the Bapis Group, a Salt Lake City-based group formerly affiliated with Morgan Stanley that was a focus of a July 2009 Investment Advisor cover story that explored the strategy of the then-nascent HighTower and its management team, led by Elliot Weissbluth.

On the surface, the tuck-in appears different from the standard HighTower strategy of lifting out major wirehouse teams centered, so far, around three distinct geographical areas (Chicago, New York, and San Francisco), but Weissbluth (left) says the tuck-ins have in fact been a core part of HighTower’s plans since its launch, and more are on the way.

“We did it 20 times in 24 months,” Weissbluth says, referring to the large teams of breakaway brokers it has brought into the HighTower fold so far.

But he says there were always two other groups in which HighTower was interested. The first were breakaway brokers who had recently “gone RIA” but realized they were not interested in the cost and effort involved in running an independent firm, such as Three Bridge Wealth and Martin Thomas Wealth Management, which Weissbluth characterized as “standalone RIA mergers into HighTower,” both of which took place last year.

The second group were individual advisors who fit HighTower’s conditions of possessing a “high level of sophistication and a good presence in the community,” but whose books of business were more “modestly sized,” says Weissbluth, meaning “ballpark, under $300 million” in AUM. Just as HighTower looked for “the right RIA before we did Three Bridge and McGuirk [referring to Thomas McGuirk, founder of Martin Thomas], we wanted to go right to the top with tuck-ins.” Weissbluth said he had “lots of advisors approach us, but we needed the right candidate” and the right geographical center. Thus Bogner, Saperstein and HighTower’s New York office.

You’re going to see more of these,” Weissbluth forecast, “because the number of smaller advisors interested in joining us is growing, and now we have the infrastructure” to support those smaller advisors. HighTower itself is likely to expand as well.

“We’re managing a pipeline of candidates in cities where we don’t have offices,” says Weissbluth, but “once we plant the flag” in other major cities—candidates would include Los Angeles, Boston, and Washington, he said, where there are major wirehouse teams—HighTower will already have “a pipeline of tuck-in candidates.”

Weissbluth says HighTower’s growth and its appeal to wirehouse brokers is “indicative of a trend of brokers wanting to leave the wirehouses. It used to be perceived that breakaways were those who couldn’t hack it” in the Wall Street firms, but “we’ve proven that that’s BS by lifting out the biggest teams in these cities.” Further, he says that the number of  “high quality, modestly sized brokers” who are “dissatisfied and looking to leave is large.”

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