Hightower CEO Bob Oros. Hightower CEO Bob Oros.

Expect Hightower to announce more strategic investments in wealth management firms in the coming weeks.

In a recent webcast with Ben Harrison, head of Pershing’s RIA custody business, Hightower CEO Bob Oros said the firm’s recent investments in Private Vista, a $1.5 billion wealth management firm in Chicago, and Dallas-based Frontier Investment Management, based in Dallas, will not be the firm’s only new deals in the near term.

Oros explained what HighTower looks for in the firms in which it invests: 

  • Clarity on the seller’s objectives
  • Quality of a firm’s leadership and training of the next generation of leaders
  • Time horizon 
  • Age mix of its client base and growth potential
  • Use of technology and other means to stay relevant

“If you’re thinking about selling, you need a list that businesses will assess you on,” Oros said. “Try to be honest, then come in more objective, the right expectations. Businesses that are growing with a great team, next generation of leaders, good mix of clients, those are really valuable.”

(Related: Peter Mallouk Tells ‘The Mooch’ Why Private Equity Loves RIAs)

Both Oros and Harrison dispelled the conventional wisdom that acquisitions and investments in the wealth management space involve primarily big firms buying into smaller ones. 

“We’re seeing the largest firms in the business acquiring firms or merging with firms of similar sizes,” Harrison said. 

Indeed, in June, Orion Advisor Solutions announced a merger with Brinker Capital, which had  $24.5 billion in assets under management, and Empower Retirement announced its acquisition of Personal Capital, which has more than $12 billion in AUM.

Not all small firms need or sell or merge with a larger firm. “Smaller firms can thrive as a small business,” Oros said. “They can outsource and can maintain a small footprint, but when they get to a certain size, they can feel the pain. They don’t have a scale advantage. Some will grow through it. Others will want to sell or merge.”

The Impact of COVID-19 On Wealth Management

Both Oros and Harrison said the COVID-19 pandemic is changing the business of wealth management and presenting challenges.

Adoption of new technology, including digitization, has accelerated, but now advisors need to prove they can develop new businesses in a new way, Oros said. “Can you get money from the next prospect you don’t know, that you haven’t spent time with to build a relationship?”

He suggested that advisors work to “optimize the experience of clients” in virtual meetings and consider their presentation skills online. To recruit new clients, he said advisors might consider a three-way Zoom meeting, with a client and prospect, and do the same with another type of financial professional (“center of influence”) and a client.

“In the old world, we would not have done this,” said Harrison, referring to the webcast he was holding with Oros rather than having the conversation in person, on stage. 

In the old days, Oros said, he wouldn’t have hired two senior executives with whom he never sat in the same room, but he did — hiring Chief Financial Officer Dan Watanapongse and Chief Investment Strategist Stephanie Link, in May and June, respectively.

“Through disruptions opportunities are created,” Oros said. He suggested that advisors now pivot to a new client experience — one led by the client (“the client way”) rather than the “advisor way,” which currently dominates. “Firms and advisors that figure that out can be well-positioned for the future.”

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