In another example of the shift in its business model from capturing breakaway brokers to buying RIAs, Hightower has made a cash and stock investment in Altium Wealth Management, a $2.7 billion RIA in Purchase, New York.
A Hightower spokesperson said the firm would not disclose specific terms of the transaction, only that it involved cash and equity, and that Hightower advisors would gain access to Altium’s direct indexing strategies.
Hightower said that as part of the firm, Altium will also seek to grow through acquisitions.
Chip Roame, founder and managing partner of Tiburon Strategic Advisors, said this is the 13th acquisition of a direct indexing firm in the last few years, including those of Parametric, Aperio, Motif, and JustInvest, among others. But Hightower Chairman and CEO Bob Oros said direct indexing was not the primary reason for the investment.
“Direct indexing was a very nice additional thing they brought to the table,” Oros said. “But we already make third-party direct indexing solutions available to advisors. This is just one more way to offer it to clients.”
Roame pointed out that this deal is another example of Hightower moving away from a strategy of going after breakaway brokers and instead buying RIAs.
There, Oros agreed.
“We had to make a decision about where we think our efforts are best spent from an inorganic standpoint,” he said. “Breakaways was chapter one, a great way to grow. But you have to talk to more of them to find some that are a fit.”
Importantly, he said, “an RIA clearly owns its clients. With a breakaway, there may be a difference of opinion on who owns the clients.”
Oros said the shift toward RIA transactions predates his arrival at Hightower in 2019.
He said there are more and more new advisory firms being created. That leads to a lot of opportunity, if the fit is right.
Roame agreed that the mergers and acquisitions trend has plenty of legs, or as he put it, “A long tail lasting five to seven years. Altium shows the market is broad for firms with several hundred million AUM to several billion AUM. There are thousands of potential acquisition candidates.”