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.
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.
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.”
Ranked No. 1 in Wealth Manager’s quarterly ranking of RIA firms by AUM, Weissbluth stood still long enough to be interviewed by Joyce Hanson of the Investment Advisor Group in early August.
Tell me your thoughts on the issue of fiduciary responsibility.
I think the fiduciary responsibility has provoked a lot of questions about what it really means to put your client first. The large firms are simply not in the business of upholding a fiduciary standard, so it’s going to be very difficult for them to adopt a fiduciary standard without significantly changing their businesses, which I don’t think is tenable.
While there’s been a lot of conversation, a fiduciary standard is not something that can simply be regulated and enforced on an entire industry.
The analogy that I use, and I don’t say this at all in a pejorative way, is if you were to go to your high-end butcher because you have friends coming over for a barbecue on Saturday and you want to get some really good tenderloin. You say to Sam the Butcher, “I was thinking about getting tenderloin,” and Sam says, “You know, the tenderloin is good, but the lamb chops are really spectacular.”
You’re there getting really good advice from somebody who’s selling you a product, right? And he’s doing you a service, and you rely on him and you enjoy the interaction, and you don’t mind being sold meat by a very high-quality meat purveyor. But he’s not your dietitian, right? Sam’s never going to recommend salmon because it’s got Omega-3s and lower cholesterol.
People get confused, I think, on whether somebody’s selling them a product or really has the health of their overall portfolio at interest.
That doesn’t necessarily make it a bad product, but it’s what he knows. He’s a butcher. He knows meat.
Correct. That’s exactly right. And I think that it is a little bit simplistic to think that a change of regulation can convert butchers into dietitians.
(Chuckle.) Huh. And you say that with your legal background.
Yes. I say that because people who go into professions go in accepting a certain expectation of how they conduct themselves.