Roger Shaffer: At first, I was looking for an option that didn't exist.
Why Roger Shaffer happily agreed to become a 'HighTower' advisor without getting paid for his practice
After two decades at Merrill and then SunTrust, the Atlanta advisor finally found the right admixture of autonomy, open architecture and paternal assurance
35min ago
Brooke’s
Note: As wirehouses tie themselves in knots trying to find a model that
will satisfy fiduciary-minded advisors — without alienating the home
army of brokers, time marches on. HighTower was already a thorn in their
sides, picking off prime teams here and there. Still, the models were
similar enough to give the wirehouses some assurance that they were on
the right track. But now HighTower is going THERE — offering near total
autonomy and total support in one package. One advisor will not wake up
the long-slumbering giant. But I joined Lisa on the interview call with
Roger Shaffer and his enthusiasm raised my pulse a beat. It also seems
to put a bounce in the Papedis step.
Why buy the cow if you can get milk for 'free’ in exchange for liberal pasturage?
Roger Shaffer spent his first 10 years of his career with Merrill Lynch and broke away to SunTrust Investment Services Inc. thinking he’d ultimately retire there. But after 10 years, he realized he was still craving more independence himself and more choices for his clients.
The Atlanta-based advisor wasn’t sure what to do because he didn’t like the independent broker-dealer model and didn’t want to become an RIA. The IBD model was too confining and the RIA model was too unsupported. In 2009, he began learning about HighTower Advisors of Chicago and was favorably impressed, but the partner option of getting bought out and tucked in didn’t give him the control of destiny that he was seeking.
Last fall, when Hightower, known as a roll-up-like venture of heady wirehouse breakaways, added a fee-for-service model, Shaffer realized this could be the right deal for him. This new program ultimately triggered his decision to take his $300 million book of business and leave.
“At first, I was looking for an option that didn’t exist,” Shaffer says. “I was very intrigued with HighTower and felt very comfortable with the firm. When they opened up the new Network channel, it let me have more autonomy and more control of my destiny and ownership of my business and it was clearly the best fit for our team. The fantastic thing is we get to take advantage of the entire platform that everyone’s worked so hard to build.”
Shaffer likes a bifurcated approach so much so that the shingles outside his Atlanta office will include both his own firm’s name and HighTower’s name. Shaffer’s team left the Alexander Key Division of SunTrust, where he was primarily involved in wealth management. His Atlanta-based team includes Rhonda Lamb, executive director; and Perry Newman, senior director. See: It won’t be long before HighTower’s fee-for-service channel revenues draw even with its partner firm revenues.
Shaffer says one of the reasons he left SunTrust is because he felt he’d get more options at HighTower in terms of open architecture and felt that HighTower’s model really focused on the client compared to the model at SunTrust, which he didn’t fee was truly client-focused.
“What excites me so much about what HighTower has done and will do is that the client relationship takes center stage in every aspect,” Shaffer says. “In my opinion, there wasn’t the same openness, flexibility and the same choice [at SunTrust] and that’s what elevated HighTower to my first choice. When I left Merrill, we had desire to find open architecture and we found it, but not nearly to the degree that we have it today.” See: Why a $1.5 billion RIA is selling internally this time — perhaps with Schwab as 'investment bank’ — after a sale to an outsider went bad.
SunTrust spokesman Hugh Suhr issued the following comment to RIABiz: “We remain firmly committed to our open architecture approach to serving our clients as we have for more than a decade. Additionally, providing advice is front and center when serving our clients and that has not changed. Any suggestions to the contrary are inaccurate.”
SunTrust recently saw the departure of some big advisors from its Genspring wealth management division, too. See: How being a $19-billion family office roll-up owned by a bank finally caught up with GenSpring.
Mike Papedis: There are certain advisors
we recognize that the partner model
may not be a good fit.
Shaffer’s departure from SunTrust was notable because SunTrust is not part of the industry-recognized broker-protocol in which companies agree to follow specific rules and guidelines when an advisor departs in order to avoid avoid lawsuits. See: Broker Protocol signings regain momentum amid new signs that the wirehouses could shut the breakaway portal.
Teams that are not part of the broker protocol can and do leave wirehouses that are not part of the broker protocol, but it means that the advisors and the firm must follow a less scripted path in an effort to avoid a lawsuit. See: Fewer companies join Protocol as downsides emerge.
To see a list of protocol firms, click here
A non-protocol team is unusual, but Mike Papedis, executive vice president at HighTower, says these aren’t unheard of for HighTower. “We do something different when it’s a non-protocol transition. When a wirehouse team leaves and they’re not in the protocol, we follow a certain process.”
But both Papedis and Shaffer were tight-lipped about the specific procedures but Shaffer did say he’s been able to contact most of his clients and many of them are supportive of his new venture. He works with about 80 families with a wide-range of backgrounds, a number of which are wealthy. Some have recently had liquidity events and others have complicated stock positions.
“We’ve been able too get in contact with majority and response has been very humbling and I couldn’t be more pleased,” Shaffer says.
This new division is a huge movement in the industry pitting HighTower against other companies that offer similar outsourcing services. HighTower executives maintain this division will quickly outpace its partner division. See: It won’t be long before HighTower’s fee-for-service channel revenues draw even with its partner firm revenues.
This new model will clearly be a boon for HighTower, says Timothy D. Welsh, CFP is president and founder of Nexus Strategy LLC. He also doesn’t feel that the company will be stealing from potential partner advisors.
“The types of advisors they are appealing to with their platform versus partnership are different enough to keep both parties happy. What this will do is enable HighTower to scale their offerings among more advisory firms faster than if they didn’t open it up. Not every advisor wants to sell and become a partner, so they are widening their footprint and leveraging their emerging brand to grab more assets. Wealth management is still an asset accumulation business and those entities that can find ways to grab assets quickly will be the ones that win.”
HighTower has significantly slowed its pace of acquisitions — having added two advisors since last summer. See: After a five-month deal-making hiatus, HighTower adds a couple of advisors and hints at a busy 2013.
Tim Welsh: Not every advisor wants
to sell.
In the Network option, the advisors is in essence an independent contractor. HighTower provides compliance, the broker-dealer for the advisor, capital markets team, technology and publication relations and marketing support as well as finance and accounting support. Shaffer has set up an LLC and the company will pay for its local expenses such as computer, staff and other local expenses.
Papedis says that as part of the deal, Shaffer’s team pays HighTower’s each month for services it provides but declined to list any of the details.
“He was more entrepreneurially minded than perhaps what’s a good fit for us in the partnerships. But he found HighTower attractive from a different spectrum of independence. The network was designed as a natural way for us to expand the growth opportunities of the firm,” Papedis says. “It was natural for us to evolve and this new innovative network allowed us to do that.”
The firm also has an Alliance option in which advisors receive some services from HighTower but don’t use HighTower’s brand.
“There are certain advisors we recognize that the partner model may not be a good fit,” Papedis says.
“Many of these advisors represent the same profile as our partner advisors, they are top performing advisors in their area, they’re community leaders but yet they want to control their own destiny and the network is a better practice for them.”
“We believe Atlanta has additional opportunities for us to grow,” Papedis says. See: A Goldman Sachs advisor in Atlanta breaks away, sits out for 90 days and builds a $1-billion-plus RIA.
Shaffer also feels there’s huge potential growth in the Atlanta area as well.
“There are a lot of advisors with entrepreneurial spirit who want choice and opportunities. My expectation is you’ll definitely see tremendous interest in the Southeast and in my market. There’s some fantastic advisors and teams out there. The only thing I’m focused on right now is the transition.”
Shaffer says he’s excited about many of the opportunities at HighTower including the firm’s Group Investment Solutions team which provides capital markets strategies to advisors.
“They’re aligning themselves with experts and this is another way that the power is shifting to the clients and advisor versus the power being at the firm,” Shaffer says.
David DeVoe, CEO of DeVoe and Co., feels that HighTower’s move will the company lure in more teams.
“This solution, like Dynasty Financial Partners, CONCERT Advisor Services and others, provides breakaways with the opportunity to launch their own business more efficiently and offer a broader set of capabilities from day one,” he says. “This is good for the independent industry and the investing public – it creates an efficient path for more advisors to move to the independent model.”
Why buy the cow if you can get milk for 'free’ in exchange for liberal pasturage?
Roger Shaffer spent his first 10 years of his career with Merrill Lynch and broke away to SunTrust Investment Services Inc. thinking he’d ultimately retire there. But after 10 years, he realized he was still craving more independence himself and more choices for his clients.
The Atlanta-based advisor wasn’t sure what to do because he didn’t like the independent broker-dealer model and didn’t want to become an RIA. The IBD model was too confining and the RIA model was too unsupported. In 2009, he began learning about HighTower Advisors of Chicago and was favorably impressed, but the partner option of getting bought out and tucked in didn’t give him the control of destiny that he was seeking.
Last fall, when Hightower, known as a roll-up-like venture of heady wirehouse breakaways, added a fee-for-service model, Shaffer realized this could be the right deal for him. This new program ultimately triggered his decision to take his $300 million book of business and leave.
“At first, I was looking for an option that didn’t exist,” Shaffer says. “I was very intrigued with HighTower and felt very comfortable with the firm. When they opened up the new Network channel, it let me have more autonomy and more control of my destiny and ownership of my business and it was clearly the best fit for our team. The fantastic thing is we get to take advantage of the entire platform that everyone’s worked so hard to build.”
Leaving SunTrust
Shaffer, 44, is the first advisor to join the Network division. He gets the benefit of HighTower’s scale by gaining access to all of the deals they’ve set up with custodians and vendors. Plus, HighTower takes care of compliance issues, legal support during the transition and the infrastructure needed to secure the office. But he runs his own business and has 100% equity in his business. He’s using Fidelity Institutional Wealth Services as his custodian and Black Diamond for performance reporting.Shaffer likes a bifurcated approach so much so that the shingles outside his Atlanta office will include both his own firm’s name and HighTower’s name. Shaffer’s team left the Alexander Key Division of SunTrust, where he was primarily involved in wealth management. His Atlanta-based team includes Rhonda Lamb, executive director; and Perry Newman, senior director. See: It won’t be long before HighTower’s fee-for-service channel revenues draw even with its partner firm revenues.
Shaffer says one of the reasons he left SunTrust is because he felt he’d get more options at HighTower in terms of open architecture and felt that HighTower’s model really focused on the client compared to the model at SunTrust, which he didn’t fee was truly client-focused.
“What excites me so much about what HighTower has done and will do is that the client relationship takes center stage in every aspect,” Shaffer says. “In my opinion, there wasn’t the same openness, flexibility and the same choice [at SunTrust] and that’s what elevated HighTower to my first choice. When I left Merrill, we had desire to find open architecture and we found it, but not nearly to the degree that we have it today.” See: Why a $1.5 billion RIA is selling internally this time — perhaps with Schwab as 'investment bank’ — after a sale to an outsider went bad.
SunTrust spokesman Hugh Suhr issued the following comment to RIABiz: “We remain firmly committed to our open architecture approach to serving our clients as we have for more than a decade. Additionally, providing advice is front and center when serving our clients and that has not changed. Any suggestions to the contrary are inaccurate.”
SunTrust recently saw the departure of some big advisors from its Genspring wealth management division, too. See: How being a $19-billion family office roll-up owned by a bank finally caught up with GenSpring.
'A certain process’
Mike Papedis: There are certain advisors
we recognize that the partner model
may not be a good fit.
Shaffer’s departure from SunTrust was notable because SunTrust is not part of the industry-recognized broker-protocol in which companies agree to follow specific rules and guidelines when an advisor departs in order to avoid avoid lawsuits. See: Broker Protocol signings regain momentum amid new signs that the wirehouses could shut the breakaway portal.
Teams that are not part of the broker protocol can and do leave wirehouses that are not part of the broker protocol, but it means that the advisors and the firm must follow a less scripted path in an effort to avoid a lawsuit. See: Fewer companies join Protocol as downsides emerge.
To see a list of protocol firms, click here
A non-protocol team is unusual, but Mike Papedis, executive vice president at HighTower, says these aren’t unheard of for HighTower. “We do something different when it’s a non-protocol transition. When a wirehouse team leaves and they’re not in the protocol, we follow a certain process.”
But both Papedis and Shaffer were tight-lipped about the specific procedures but Shaffer did say he’s been able to contact most of his clients and many of them are supportive of his new venture. He works with about 80 families with a wide-range of backgrounds, a number of which are wealthy. Some have recently had liquidity events and others have complicated stock positions.
“We’ve been able too get in contact with majority and response has been very humbling and I couldn’t be more pleased,” Shaffer says.
Stakes are high
The stakes in HighTower’s non-partner mode are clearly high because HighTower is counting on this as a significant growth engine and some industry insiders have worried that the firm could be hurting its partner division to help its non-partner division. But industry leaders say it is a net gain because HighTower is growing its business without the company needing to use capital.This new division is a huge movement in the industry pitting HighTower against other companies that offer similar outsourcing services. HighTower executives maintain this division will quickly outpace its partner division. See: It won’t be long before HighTower’s fee-for-service channel revenues draw even with its partner firm revenues.
This new model will clearly be a boon for HighTower, says Timothy D. Welsh, CFP is president and founder of Nexus Strategy LLC. He also doesn’t feel that the company will be stealing from potential partner advisors.
“The types of advisors they are appealing to with their platform versus partnership are different enough to keep both parties happy. What this will do is enable HighTower to scale their offerings among more advisory firms faster than if they didn’t open it up. Not every advisor wants to sell and become a partner, so they are widening their footprint and leveraging their emerging brand to grab more assets. Wealth management is still an asset accumulation business and those entities that can find ways to grab assets quickly will be the ones that win.”
HighTower has significantly slowed its pace of acquisitions — having added two advisors since last summer. See: After a five-month deal-making hiatus, HighTower adds a couple of advisors and hints at a busy 2013.
Controlling your destiny
Papedis says his firm feels the new options are perfect for advisors like Shaffer who want more control of their own destiny but also want to use all of the services that HighTower provides.Tim Welsh: Not every advisor wants
to sell.
In the Network option, the advisors is in essence an independent contractor. HighTower provides compliance, the broker-dealer for the advisor, capital markets team, technology and publication relations and marketing support as well as finance and accounting support. Shaffer has set up an LLC and the company will pay for its local expenses such as computer, staff and other local expenses.
Papedis says that as part of the deal, Shaffer’s team pays HighTower’s each month for services it provides but declined to list any of the details.
“He was more entrepreneurially minded than perhaps what’s a good fit for us in the partnerships. But he found HighTower attractive from a different spectrum of independence. The network was designed as a natural way for us to expand the growth opportunities of the firm,” Papedis says. “It was natural for us to evolve and this new innovative network allowed us to do that.”
The firm also has an Alliance option in which advisors receive some services from HighTower but don’t use HighTower’s brand.
“There are certain advisors we recognize that the partner model may not be a good fit,” Papedis says.
“Many of these advisors represent the same profile as our partner advisors, they are top performing advisors in their area, they’re community leaders but yet they want to control their own destiny and the network is a better practice for them.”
First time in Atlanta
Shaffer’s the first team in Atlanta and Papedis says he is hopeful that HighTower will recruit other Atlanta-based teams. It is unclear whether those advisors would work in the same office with Shaffer or not. Shaffer says it’s too soon for him to think about expanding his business now. He’s focused on bringing over clients.“We believe Atlanta has additional opportunities for us to grow,” Papedis says. See: A Goldman Sachs advisor in Atlanta breaks away, sits out for 90 days and builds a $1-billion-plus RIA.
Shaffer also feels there’s huge potential growth in the Atlanta area as well.
“There are a lot of advisors with entrepreneurial spirit who want choice and opportunities. My expectation is you’ll definitely see tremendous interest in the Southeast and in my market. There’s some fantastic advisors and teams out there. The only thing I’m focused on right now is the transition.”
Shaffer says he’s excited about many of the opportunities at HighTower including the firm’s Group Investment Solutions team which provides capital markets strategies to advisors.
“They’re aligning themselves with experts and this is another way that the power is shifting to the clients and advisor versus the power being at the firm,” Shaffer says.
David DeVoe, CEO of DeVoe and Co., feels that HighTower’s move will the company lure in more teams.
“This solution, like Dynasty Financial Partners, CONCERT Advisor Services and others, provides breakaways with the opportunity to launch their own business more efficiently and offer a broader set of capabilities from day one,” he says. “This is good for the independent industry and the investing public – it creates an efficient path for more advisors to move to the independent model.”
