RIAs may boast that they rise to fiduciary standards, but they tend not to have the level of back-office support that wirehouse advisors get from their companies. The firms in the hybrid model, however, offer technology, legal support, office space and equipment, among other business needs. And the advisors maintain ownership of their book of business as an independent advisor would.
SeaCrest keeps a percentage of advisors' production, while HighTower pays advisors for their practice's contribution to the firm rather than sales production. The new hybrids could be attractive to advisors at some RIAs looking for more business support, but HighTower and SeaCrest are both set up to recruit primarily from the wirehouse world.
"It's the best of both worlds," says one longtime wirehouse advisor who is now at Merrill Lynch. "But I have to think about what makes my clients happy, and right now, that is to be at a large institution." He says that even with the damage that has been done to the wirehouses' reputations, there is still a benefit to being with a brand people know.
Edward Sullivan, president and managing partner at SeaCrest, was an executive VP at Morgan Stanley before he and his three colleagues left in 2006. He says he sees the wirehouse industry as "a shrinking marketplace."
Both SeaCrest and HighTower are looking for advisors with several years' experience and several hundred million in client assets-"guys with options. Not the guys who are being pushed out," Weissbluth says.
While HighTower is offering a cash signing bonus similar to those at traditional brokerages, SeaCrest doesn't. Instead, it touts its payout-which can double what an advisor gets at a wirehouse-to attract new recruits. Both firms also offer an equity stake to new advisors.
Last month, Morgan Stanley Smith Barney filed a New York state lawsuit against five resigning top advisors to keep them from joining HighTower, accusing the former advisors of violating their contractual commitments and fiduciary duties.
HighTower now has 24 advisors, a number it plans to double by year's end. It is aiming for a total of $40 billion to $50 billion in client assets in the next couple of years.
SeaCrest has 16 advisors in six offices, and says it is willing to expand in any area of the country where advisors are interested.
HighTower, which prides itself on its strategy of being multiple custodians and multiple clearing firms, expects other businesses to follow in its footsteps. "And that would be good for the industry," Weissbluth says. "Anytime you can increase transparency and competition, it will be good for the individual investor."
Copyright © 2010 Dow Jones & Company Inc.
CFP Aspirants Need A Plan
By autumn 2011, anyone who wants to earn the certified financial planner designation will have to prepare a written, comprehensive financial plan as part of the established curriculum. The Certified Financial Planner Board of Standards Inc. last month announced it had adopted the requirement as a way to better assess the ability of its applicants to deliver the financial planning goods to the public.