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Advisor Execs Rip Hightower for Suing Breakaway RIA

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What You Need to Know

  • Hightower is seeking $500,000 in damages from breakaway Michael Policar, saying he stole client information when going independent.
  • LPL exec Burt White likened the suit to hanging a beheaded pirate in a harbor as a warning to others.
  • Hightower has moved from an indie model toward a long-term affiliation model in recent years, its CEO says.

Advisors and other industry experts are calling out Hightower for using a wirehouse tactic to go after a former advisor over client information.

Michael Policar “stole Hightower’s confidential and proprietary information, trade secrets, and solicited Hightower clients for the benefit of his newly created competing company,” NGP Financial Planning, Hightower alleged in its complaint, originally filed Dec. 16 at the Circuit Court of Cook County in Illinois but shifted to U.S. District Court for the Northern District of Illinois on Jan. 14.

Hightower is seeking $500,000 in damages.

Burt White, managing director and chief investment officer of Investor and Investment Solutions at LPL Financial, likened the suit to “hanging beheaded pirates in the harbor to control by intimidation and fear.”

He tweeted Saturday: “I know nothing of this particular case. But usually when these happen [it’s] not about the advisor that left, but a scare tactic to frighten other advisors not to ever do the same.” 

The story was first reported by AdvisorHub in late January and then Thursday by Financial Planning, whose coverage has attracted social media attention over the past few days.  

In response to the news coverage, Kyle Happe, founder and compliance specialist of BackStop Compliance, tweeted Friday: “So if it’s impossible to start a RIA without taking proprietary information doesn’t that mean that every RIA that left a brokerage firm to join Hightower should be sued? As well as Hightower themselves for facilitating that transition? I mean wtf…”

Meanwhile, Penny Phillips, president and co-founder of Journey Strategic Wealth, tweeted: “This is gross.  Also, Mike is a good guy.  I hope the whole industry rallies around Mike & others like him…. THESE are the types of things that need to be explored & talked about.”

Hightower’s Complaint

Policar was registered with Hightower from September 2019 to January 2021, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website. During that time, he “accessed and used Hightower’s confidential and proprietary work product, including client lists and various intellectual property regarding wealth management on a daily basis in furtherance of his job duties while at Hightower,” according to the firm’s complaint.

Policar resigned from Hightower on Jan. 8, 2021. That same month, Policar founded NGP Financial Planning, with 30 clients as of the time the complaint was filed.

As part of an agreement he signed with Hightower, Policar “promised to safeguard confidential information and take precautions to prevent the disclosure and improper use of confidential information,” the complaint said.

However, “Policar failed to safeguard Hightower’s confidential information; Policar violated Section 3(c) of the agreement when he used such confidential information for improper purposes and to his advantage, thereby harming Hightower,” according to the complaint.

The agreement restricted Policar from contacting Hightower clients for 12 months following his termination, according to the complaint, which said he contacted Hightower clients exclusively by phone “in order to avoid leaving a paper trail of his wrongful behavior.” 

Hightower is seeking to have Policar return to the firm “any and all of Hightower property in physical form or hard copy in the possession, custody or control of Defendants, including but not limited to, confidential client information and trade secrets,” according to the complaint.

Among other things, the firm is seeking money damages “in an amount to be determined at trial, but not less than $500,000,” as well as its “costs and reasonable attorney’s fees.”

Policar Responds

“You know how these things go” Policar told ThinkAdvisor by email on Monday. “There’s not much I can say other than I deny any breach of my agreement with Hightower. I am hopeful that we can resolve this matter without the time and expense of litigation.”

Policar and his new firm were both named in the complaint.

In December, Hightower secured a temporary restraining order against against David Rubis, who resigned from the firm in August and joined RIA Clearstead in Cleveland. 

Rubis agreed to a stipulated injunction that bars him from soliciting clients and compelling him to return any client information he took, according to court documents. Hightower is also seeking at least $1 million in damages, and a settlement hearing is scheduled for March. Rubis and his attorneys did not immediately respond to requests for comment.

Hightower’s Strategy

Hightower CEO Bob Oros declined to comment on specifics related to the complaints on Monday during a phone interview with ThinkAdvisor.

As for the criticism Hightower received on Twitter, he said only: “Everyone’s entitled to their opinions.”

The firm has gone through “a business model transformation over the last few years,” he said. The first RIA acquisition that it made, in 2016, was “really the beginning of the transformation to what we are now, which is a national wealth management firm” that is, “first and foremost … focused on helping our advisors drive organic growth,” he explained.

However, “inorganically, we’re doing RIA acquisitions and so our business model is just very different,” he said.

He went on to compare the model to a different sector to help clarify Hightower’s strategy: “Think about if you are taking a job as a driver… and there’s a number of different ways you can sort of fulfill the obligations of driving a car. The first one is you can use your own car… and if I leave that job and go drive for someone else, then my car comes with me.”

That’s an independent model, he noted.

However, if you drive a car you do not own and then leave that job to drive for somebody else, you obviously can’t take the car with you, he explained.

“Our business has evolved from sort of that first example to what we are now, which is the latter example,” he said. “Advisors that join Hightower are joining Hightower under a long-term affiliation.”

He declined to say how many advisors the firm has sued in similar cases. But he said disputes like those in the two recent complaints have been “rare.”

(Pictured: Michael Policar, financial planner and founder of NGP Financial Planning)


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