Prior to taking the top job at Hightower Advisors in 2019, Bob Oros was a financial industry veteran, having climbed the executive ranks at Schwab, LPL Financial and Fidelity. But that wasn’t the only buzz he was making at the time.
He was also a partner in a regional craft brewery, a very different business from the national RIA consolidator he was about to run.
You see, managing a craft brewery is a hands-on, creative endeavor with a strong focus on product quality. It’s also marketing-heavy because the public needs to discover your product in order to try it. And that’s not easy at a small but growing business.
Hightower, on the other hand, is a large-scale operation built on small businesses that have become successful more as a result of the enthusiasm and managerial skills of the operators than the taste and marketing of the product itself.
The common denominator of both enterprises in Oros’ eyes: the customer.
“Neither endeavor would be successful without an eternal focus on people,” he said. “What people want. What they say about you. What they don’t even know they want, but we can deliver.”
BUYING THE NEXT ROUND
When Oros joined the Chicago-based RIA aggregator as CEO in January 2019, it was already a very different business from the one first started in 2007. Back then, it was primarily focused on recruiting wirehouse brokers to operate as partners under the Hightower banner.
That modus operandi changed shortly before Oros’ arrival after private equity powerhouse Thomas H. Lee Partners purchased a large stake in the firm, infusing it with $100 million of fresh capital. Cash in hand, Oros had the deep pockets to go fishing for small to midsize RIAs across the country.
Pretty soon, the minnows were turning into whales, with Oros regularly reeling in advisory teams with AUM in the multibillion dollar range.
Moreover, more and more of that revenue was heading back to Hightower. The firm owned just 23% of the advisers’ practices and revenue when Oros started at the company. Skip ahead to today, and that number is over 98%.
“This is increasingly important as the first round of RIA founders begin to retire. Succession and consolidation are a challenge that we are now equipped to help our firms solve as part of a community of well-run, well-thought-out businesses,” Oros said.
As a private company, Hightower does not disclose financial data, including total annual revenue. At last check, it boasted about 135 advisory businesses in 35 states and the District of Columbia, with AUM totaling about $131 billion.
While the firm has nearly completed its change from a partnership to an acquisition machine, the pace of its purchases may be slowing. Hightower, which has announced 11 deals so far in 2023, recently said it was laying off 5% of its employees as part of an “internal adjustment.”
RAISING THE BAR
Considering all the businesses that it’s rolled up in the past few years, it’s not a surprise that people equate Hightower with acquisitions. Oros, however, maintains that inorganic growth is not his primary focus.
“Organic growth is our top priority and an important aspect of our strategy for how we build both our advisory businesses and the firm overall,” he said. “Businesses that can deliver consistent, proven same-store sales growth are highly valuable.”
As to how Oros supports those many parts that make up the whole that is Hightower, he said the key is providing advisors with value-added resources, such as Hightower’s in-house trust company services, investment management offerings and private market alternatives, estate and tax planning services, and marketing support.
Having access to these resources helps advisors create “a seamless, more holistic client experience,” which in turn drives an increase in referrals, Oros said. New client relationships are, of course, critical to growth in the advisory industry.
When it comes the kind of profile that makes an RIA a strong acquisition candidate for Hightower, Oros says it’s been consistent since his arrival.
“These are long-term relationships, so it must make sense from both a business and a cultural perspective on both sides of the table. We look for founders with progressive mindsets excited about running their business, who are growth-oriented, and have built successful practices that clearly demonstrate their long-term value,” he said.
Oros is quick to point out that Hightower has been busy acquiring service providers in addition to RIAs to round out the firm’s offerings. In July, for example, Hightower made a strategic investment in GMS Surgent, a CPA firm offering high-end tax planning and preparation services.
“As a wholly owned tax subsidiary, the GMS Surgent team expands the suite of tools Hightower already offers, which includes GTBA, a business management firm offering family office services and Wellspring, which supports advanced estate and tax planning strategies,” he said.
BREWING UP SUCCESS
The inherent unpredictability of Wall Street ensures there is not an all-encompassing playbook for industry success. Oros attests to the fact that the only thing guaranteed from a lifetime spent in the wealth management world is experience, and the scars to prove it.
“Having seen the industry from a number of different views has been very helpful as we go through different cycles, and as a leader you become a compilation of all the experience you have had along the way,” he said.
Market — and career — ups and downs aside, Oros fervently believes the best part of his job is being part of an industry that makes a difference in people’s lives.
“We help them retire, pay for kids’ education, leave a legacy and, most of all, make our world a better place,” he said.
Cheers to that.