Hightower is a well-capitalized company backed by several outside institutional investor groups. That includes Red Eagle Ventures, a private-equity firm led by David Pottruck, the former CEO and president of Charles Schwab and a current Hightower board member.
To date, BHWM has been funded solely by Black-Scott. The company is currently in a "friends and family" round of capital raising, and will begin sourcing additional investment capital in six to 12 months.
"I see smaller independent advisor firms attempt to recreate that [Hightower-like] model all the time, whether they have grand ambitions to be a national firm or are simply trying to develop a regional or super-regional strategy," says David Selig, CEO of Advice Dynamics Partners, an M&A consulting firm in Mill Valley, Calif.
"It's a common refrain: Build a better mousetrap and the disenfranchised will come," he continues. "But you need to have a very compelling pitch that helps you differentiate yourself, maybe not from a Hightower, but from an RIA down the street trying to do the same thing."
For BHWM, whose office is in the heart of Beverly Hills on Wilshire Boulevard near its intersection with Rodeo Drive, its goal is to hire two or three additional advisors by year-end. It aims to have from $80 million to $100 million in revenue in five years. "Based on the plan we've put together, we believe we can do that with a steady growth trajectory," Black-Scott says.
She adds BHWM is working on expansion opportunities in different cities around the country, but wants to grow carefully to make sure they get it right. "We don't want to get ahead of ourselves," she says.
For now, BHWM is relying on Black-Scott's industry contacts--as well as word-of-mouth referrals--to expand its advisor base. She says they'll eventually hire recruiters to attract new talent.
States Getting Ready For Advisor Oversight
As most advisors should know by now, the Dodd-Frank Wall Street Reform and Consumer Protection Act that became law this summer will switch investment advisors with less than $100 million in assets under management from federal to state registration by July 21, 2011. The law will affect about 4,000 investment advisors, and has raised concerns in some circles about whether state securities regulators in cash-strapped states will have the resources to do the job.
Regardless, it's the law of the land, and state regulators are gearing up to handle the increased workload. In response, the industry membership group, the North American Securities Administrators Association, has created the IA Switch Resources center (www.nasaa.org/industry___regulatory_resources/investment_advisers/13183.cfm) to help advisors transition to the new order.
Among other things, the site contains an FAQ section, a directory of state broker-dealer and investment advisor registration and examination contacts, and a calendar of events listing seminars and workshops hosted by various state securities offices. It also aims to keep advisors abreast of the latest happenings as the SEC and the states hash out details of the transition, such as when advisors should begin the switch and how much it'll cost.
"Costs should be limited, depending on the timeline," says Patricia Struck, administrator of the Wisconsin Department of Financial Institutions' securities division. "And that's the kind of thing we're identifying right now."