Penny Phillips of Journey Strategic Wealth thinks the wealth management industry in many ways has come full circle.
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After years of advisors breaking off from wirehouses and other large firms in search of independence, many in the industry have come to appreciate the benefits of some sort of affiliation with a bigger partner. Phillips thinks the future belongs to wealth managers that can provide independent advisors with services they would struggle to secure on their own while also not trampling on their entrepreneurial spirit.
“We’re almost reverting back to where the industry started with the big firm that had everything there for the advisor,” said Phillips, the president of Journey Strategic Wealth. “I think it was sort of inevitable to get back here.”
It was with an eye toward finding a larger partner while maintaining a good deal of independence that Phillips and her colleagues decided to sell Journey Strategic Wealth to the large RIA aggregator Hightower Advisors. Hightower announced last week that it had added Journey Strategic Wealth and its $5 billion in client assets to its Signature Wealth unit, where Journey’s 16 advisors will work as direct employees rather than independent contractors. The terms of the deal weren’t disclosed.
READ MORE: Dispelling the myths about independence: A Q&A with RIA coach and entrepreneur Penny Phillips
Without Hightower’s assurances, there would have been no ‘second conversation’
Phillips was widely hailed in the industry as the first female member of the millennial generation to help start an RIA “roll-up,” or acquirer of other firms, when she co-founded Journey Strategic Wealth in 2021. She has guided the Summit, New Jersey-based firm as it has gone from having just over $2 billion in clients assets to roughly $5 billion now.
That growth was driven in large part by the addition of nine advisory teams over the past three and a half years. Advisors who joined were allowed to keep control of their books of business while receiving help with billing, human resources, payrolls, investment management, technology, marketing and other back-office functions.
Phillips, who will now add the title of head of advisor strategy and client experience at Hightower Signature Wealth, said a large part of her job will be ensuring the Journey Strategic Wealth team and other advisors in Hightower’s direct-employee division don’t lose their sense of independence. She said that if she had ever received the impression joining Hightower would cost her colleagues’ their ability to run their businesses as they see fit, “we would have never even had a second conversation.”
Hightower Advisors CEO Larry Restieri said in a statement that Phillips will play an “instrumental role” as the firm continues “to be a destination for advisors who want to scale thoughtfully.”
READ MORE: Hightower acquires tax firm, launches new unit
Advisors’ demand for tax preparation, estate planning services
As high a priority as independence may be, the Journey Strategic Wealth team had come over time to recognize there were certain services they would struggle to supply on their own, Phillips said. Advisors, she said, were expressing a desire to move into services such as tax preparation — which goes beyond basic tax planning and minimization and provides clients with assistance with actual filings. Hightower acquired the tax specialist GMS Surgent in 2023.
Without such in-house expertise, firms often rely on outside professionals like certified public accountants. Phillips said Journey Strategic Wealth has quite a few clients who were saying things like, “I’m not really happy with my CPA. I wish I had another option. I wish I could do everything with you.”
Hightower itself was founded in 2008 by a group of businessmen seeking to give former wirehouse and brokerage advisors a place to secure greater independence without the hassle of having to start their own RIAs. The firm initially grew mainly by recruiting advisors from its Wall Street competitors before turning to mergers and acquisitions.
Its Signature Wealth unit for direct employees, with $25 billion in client assets, added five advisory teams in January alone. Journey Strategic Wealth, the largest firm to join so far, will be formally incorporated into the Strategic Wealth unit at the end of this month.
Hightower, Phillips said, will open the door not only to services related to tax preparation and planning but also estate planning — another offering highly sought after by many clients. Another advantage, she said, will come from Hightower’s majority stake investment in 2024 in NEPC, an investing consultant specializing in providing advice to institutions, endowments, foundations and private wealth clients.
Journey Strategic Wealth, which had been using Purshe Kaplan Sterling as its outside broker-dealer, will also be using Hightower’s internal brokerage services. The change will give “our advisors a single integrated experience,” Phillips said.
The role of private equity at Hightower and the industry at large
Much of the capital for Hightower’s own acquisitions has come from the sale of ownership stakes in itself to private equity firms. Hightower brought in the PE firm Thomas H. Lee Partners as an owner in early 2018 and has gone on to sell shares to Coller Capital and Neuberger Berman Group.
Much of the consolidation seen in the industry in recent years has been driven by aggregators like Hightower. In a report from January on RIA sales, the industry-tracking firm DeVoe & Co. found that consolidators — many of them with private equity backing — were behind just over half of the record number of 322 advisory firm acquisitions logged last year.
“Consolidators once again accounted for the largest share of buyer activity, consistent with their long-term role as the primary drivers of RIA M&A,” according to DeVoe’s report.
Phillips acknowledged that some advisors have had bad experiences with private equity-backed firms.
“There have been advisors that have gone to firms, and they didn’t totally understand the deals that they were signing,” Phillips said. “And maybe the firm completely changed after they were acquired. That certainly does happen.”
At the same time, she said, the capital to build out the sort of service array that clients want has to come from somewhere. That brings Phillips back to her prediction that the industry will one day belong to firms that can provide advisors with the sorts of accommodations they may find at a wirehouse while not impeding on their general independence.
“My learning over the past however many years has been that independence, to the really good advisor, means that they spend their time doing the things that they really love,” Phillips said. “Most of the time that isn’t filing out a Form ADV and working on their [profit and loss statements]. And I think Hightower Signature Wealth is a reflection of that.”
