July 16, 2012

MSSB Loses $600 Million Lerner Group to HighTower

Eugene Lerner received his PhD under Milton Friedman at the University of Chicago and taught Alan Greenspan at NYU

Advisor-owned financial services company HighTower Advisors on Monday announced the addition of yet another breakaway wirehouse broker team, this one from Morgan Stanley Smith Barney, saying that the Chicago-based Lerner Group is bringing $600 million in assets under management to a new HighTower office on Chicago’s North Shore.

Team head Eugene Lerner, 83, received his doctorate under University of Chicago economist Milton Friedman, and Alan Greenspan was a student under Lerner when he was a professor at New York University. Lerner is now a professor emeritus at Northwestern University. Other Lerner Group members to join HighTower are Mingdong Tan, 38, and Walter Gondeck Jr., 31. All three will join HighTower as managing directors and partners.

HighTower CEO Elliot WeissbluthThis is the seventh new advisor team in 2012 to join the Chicago-headquartered financial services firm run by CEO Elliot Weissbluth (left), who this year was named one of Investment Advisor magazine’s IA 25 honorees. It is the 32nd team to join the HighTower partnership since its founding five years ago.

Mark Elzweig, a New York-based executive-search consultant who does recruiting in the asset management universe, says that the HighTower model is attractive to high-end producers because it allows them to join an independent firm with a multi-custodial platform and get deals that are a combination of upfront cash and firm stock. HighTower has not yet gone public, but observers expect it to eventually launch an initial public offering.

“HighTower is pretty well known to wirehouse advisors, and they’re not a new firm at this point,” Elzweig said in a phone interview. “They’ve been around for a few years, and that should only accelerate their growth going forward. Once a firm attracts a group of high-end producers, as they’ve done, they achieve critical mass.” IPO? That’s one of the attractions here, if they go public.

Lerner said in a statement that his group decided to join HighTower because of its open-source model and platform, both of which are unique to the industry.

“We surveyed the marketplace and HighTower has the only platform that supports our access to multiple custodians and clearing firms, along with a wide array of best-in-class investments,” Lerner said.  “Our team now has a suite of tools, services and products that are simply unavailable from any other platform.”

Before joining Morgan Stanley Smith Barney, where he was a director of wealth management, Lerner served on the Chicago Stock Exchange’s Board of Governors and spent more than 20 years as president of his own investment advisory firm, Disciplined Investment Advisors. He is a professor emeritus of finance at Northwestern University’s Kellogg Graduate School of Management. Lerner also taught at the graduate business schools at New York University, City College of New York and the University of California, Los Angeles.

Tan was a vice president of wealth management at Morgan Stanley Smith Barney and is responsible for executing all of The Lerner Group’s equity trades. He worked at Disciplined Investment Advisors from 2000 to 2002 and holds a Master of Science in management information systems from Northern Illinois University and bachelor’s degrees in economics and business law from Hua Zhong University of Science and Technology in his native China.  Before arriving in the U.S., he worked at the People’s Bank of China.

Gondeck was a first vice president of wealth management at MSSB and recently obtained his MBA from Northwestern University’s Kellogg School of Management. 

 “The Lerner Group is joining our firm because they share our commitment to doing business free of the conflicts of interest found at many of the wirehouses.  At HighTower, we make Wall Street compete for our business,” said Mike Papedis, HighTower’s executive vice president of business development, in a statement.

A Morgan Stanley Smith Barney spokeswoman declined to comment other than to confirm that the Lerner Group is no longer with MSSB.

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