HighTower's open platform will put pressure on custodians: Weissbluth

Elliot Weissbluth, chief executive of HighTower Advisors LLC, thinks his firm's multicustodian and multiclearing firm platform — which essentially plays vendors against one another — is about to change the industry. The firm on Wednesday announced an enhanced version of the platform, the HighTower Open Source Technology system. But the announcement wasn't so much about an upgrade as it was about what the firm sees as the coming-of-age of its firm's capabilities, now under the leadership of new chief information officer Doug Besso. The enhanced HOST platform is the culmination of what HighTower has been working on for five years, Mr. Weissbluth said. "What's new is that it's been battle tested by advisers" for the past two years, he said. HighTower always has made much of the fact that it allows its partner-advisers to use multiple custodians and clearing firms, as well as a variety of outside product and service vendors. Some of the HOST technology comes from vendors, some is custom built. "We want to leverage our vendors and custodians, and the technology they've built," said Mr. Besso, a former technologist at Wachovia Securities LLC who joined HighTower three months ago from Calamos Investments LLC. "Some of [the vendor technology] is exactly what we want," Mr. Besso said. "But we also want to bring it together in a different way ourselves." Mr. Weissbluth said it took him three years to recruit Mr. Besso. "With Doug, we can really integrate different systems and technologies," Mr. Weissbluth said. HighTower said its system incorporates features from Fidelity, Schwab, Pershing, JPMorgan, RBC Global, Envestnet, alternatives providers CAIS and Altegris, Black Diamond, and Mercer, which supports fiduciary services for endowments and foundations. "This does look like an impressive feat, and it could lead to further pricing pressure in the clearing space," depending on the extent of the platform, said Sophie Schmitt, a senior analyst at Aite Group LLC. HighTower claims that it can cherry-pick services from custodians and force them to adapt. "We have a bird's-eye view into all their platforms so, for example, we can load up three screens, with three applications, to trade a bond or [issue] a wire, and we can look at how all those firms have built out that sliver of technology, and the strengths and weaknesses to each," Mr. Weissbluth said. The firm can adopt the best of each or force competing vendors to change their process or pricing, he said. "We're a change agent for the industry," Mr. Weissbluth added. A key part of the system is HighTower's own database, he said. "We're flowing data into a central container where we own the data and manage the data, and then can send it out to a billing system, a reporting system, or [another] application," Mr. Weissbluth said. "We're the epicenter of all that data flow. If we change a vendor, it's like swapping out a carburetor" on a classic car. Custodians have been responsive because "they know we can back up the AUM dump truck," he added. HighTower doesn't provide hard numbers on assets under management, but Mr. Weissbluth said the firm now has north of $20 billion.