“It has never been a better time to go independent as it is today,” says Elliot Weissbluth, chief executive of HighTower.

A recent report by Cerulli Associates said that independent advisor channels in the US are projected to represent 38 per cent of asset market share through 2016, as the “breakaway” trend seen in recent years continues.

And “it has never been a better time to go independent as it is today,” says Elliot Weissbluth, chief executive of HighTower, the US financial services firm which a year ago launched the HighTower Network specifically for so-called breakaway advisors.

Speaking to Family Wealth Report, Weissbluth said end-clients are now recognizing the value of having a fiduciary and conflict-free financial advisor.

“That used to be a point of anxiety, but today’s it’s becoming a point of confidence,” he said.

However, for advisors giving up the safety net of a large organization and transitioning to independence, the move is “harder than most imagine,” SEI noted in a white paper earlier this year. John Anderson, head of practice management for the SEI Advisor Network, previously told this publication that he believes advisors “really underestimate” the complexities associated with launching their own business. Meanwhile, it has been argued that the concentration of assets and high productivity of wirehouse broker-dealers means they can still be “very profitable” for asset managers, despite high costs and competition.

But despite various “myths” – such as that transitions to independence will result in a loss of clients and revenue – Weissbluth says there is no data pointing to a shift from the independent world back to the “conflicted world of the banks and brokerages.”

At the heart of the issue is the matter of how clients perceive advisors; many believe their advisors operate under a fiduciary model in which they must put clients’ best interests first, Cerulli said in a report last year.

At present, registered investment advisors must adhere to a fiduciary standard under the Investment Advisers Act (1940), while brokers operate under a “suitability” rule and are regulated by FINRA rather than the Securities and Exchange Commission.

While, Dodd-Frank allowed the SEC to establish a uniform standard for advisors and broker-dealers, disagreements have delayed the process and the authority has yet to announce when - or indeed if - it will happen. Only last month did the Department of Labor say it will halt its potential fiduciary rule until at least January 2015 from August 2014.

One-direction trend

“The data only shows one direction. You can argue about the rate of change, and you can argue about the trajectory of the trend, but you cannot argue about the direction of the trend,” Weissbluth said. “Independent financial advisors are not going into the traditional bank brokerage firms; there is no reverse behavior.”

The average HighTower Network team works with $600 million in assets, with the average revenue of the organization’s financial advisors being around $1.5 million. This is “higher than the average of any Wall Street firm,” Weissbluth said.

Meanwhile, he noted that clients are loyal to their advisors: “When push comes to shove and the advisors leave, we find that between 85-90 per cent of the clients follow them within the first year,” he added.

HighTower Network

HighTower is headquartered in Chicago, IL, and was founded in 2007; it has regional corporate centers in New York and San Francisco and 29 offices across the US counting 291 employees, 29 advisor teams and 96 total advisors.

The HighTower Network business model takes between 10 and 20 per cent of each independent firm’s revenue – depending on the service package they opt for – for providing services spanning global investments, transition support and technology. The teams then have total autonomy to manage the rest of their business and expense structure.

“We don’t do any cold calling or…try and convince people to leave the big firms. It’s all inquiries from teams that want to leave,” said Weissbluth.

The makeup of network members is generally teams but the firm also does business with “soloists” - single advisors with support staff. “Both are attractive to us, they are just different profiles,” Weissbluth said.

Looking at the broader trend and the transition process, Weissbluth said the first year - especially the first six months - is fairly frantic. Not only must new teams focus on transitioning their clients but they have to learn how to use new tools, systems and processes.

HighTower Network is nonetheless “scaling up,” Weissbluth said. Indeed, last month alone the firm welcomed the The Sacramento, CA-based Ezzell Group and The Gryphon Financial Partners team.