His writing and speaking activities on economics and politics are a major part of his business. “The ethos of HighTower was one that encouraged that kind of free articulation of a point of view,” he says.
The wirehouses have a good reason to avoid controversy and boat-rocking. “A lot of times, they would censor me in terms of things I want to say about the Fed, for example. Well I don’t blame them. The Fed was their regulator and they had a pretty cozy relationship with the Fed, where in this world, those types of things you just don’t have to think about. I can be right, I can be wrong, but it’s my call to make.”
Morgan Stanley also limited the way he could run his organization. “We had an attitude in our business—people I wanted to hire, people I wanted to fire, roles I wanted people to play, titles I wanted to give them, compensation I wanted to give them,” he says. Morgan’s size was the symptom of the problem, in his view. If two advisors are working in a company with thousands, the model for one has to default to the lowest common denominator, he says.
Bahnsen says he didn’t simply launch his own independent RIA because he became convinced HighTower would be able to provide resources, technology and infrastructure. The challenges of running a new firm were sufficient without having to build a back office, he says.
The technology bench was also a selling point. If he’d gone out on his own, “I’d have to pay attention to technology a lot more than I do,” he says.
Chris Jones, at Irongate Partners, came to HighTower in November 2016, bringing along $225 million or so in assets, with a familiar story: His firm’s growth had stalled.
“We were our own ADV, an SEC-registered firm, and then independent since our launch in October 2004. We had had a wonderful growth trajectory and had really hit this interesting weird almost stall, if you will. A step forward, a step back,” Jones says. “We were seeking a partner to help us take that next step because we had gotten to the point of being in the business of running a business versus continuing to be in the business of wealth management.”
Irongate had tried to do everything itself until then—from ordering the paper and pens it bought to running its own compliance department. He says that during the last full year under the firm’s own ADV, legal costs and compliance costs, including staff time and effort, cost the firm about $100,000. That put the cost of outsourcing most of these tasks to HighTower, while hardly cheap, in perspective.“Because you have to do everything. You have to have check logs, you have to have trade blotters … you have to look over random trades; you have to look over random accounts,” Jones says.
These expenses aren’t getting any cheaper. “This industry has changed and continues to change so dramatically and so quickly that we were really doing our clients but also ourselves a disservice by trying to be that self-contained ecosystem versus partnering with someone that could provide some of that leadership and allow us to get back to some of the things that we do best, which is serving as our clients’ personal CFO,” Jones explains.
The Alabama firm Twickenham Wealth Advisors came over to HighTower from Morgan Stanley with $500 million in 2013, says one of its team members, Moss Crosby, in part because it needed to loosen the handcuffs a little when talking with clients. “We wanted to engage a client on something that was important for them, whether it was a real estate transaction or some trust work or a specific private equity investment that wasn’t on the platform,” Crosby says. “We wanted to be able to engage with a client … and not be burdened with a set of rules that might have managed to the lowest common denominator.”