First Allied Holdings said Wednesday that it is buying the Legend Group from Waddell & Reed (WDR). The transaction should close in January, according to Waddell & Reed.
Joel Marks, chairman of First Allied Securities, says the combined entity will include about 1,500 independent advisors with some $30 billion in assets under administration. First Allied now includes about 1,000 independent financial advisors, while Legend has roughly 450 reps, who focus on the 403(b) retirement marketplace.
“This transaction is about rapid growth and revenue creation,” said Marks (left) in an interview with AdvisorOne.
“For First Allied advisors, we can add the Legend opportunities to the retirement space at a more sophisticated, competitive level to increase business,” Marks said. “And for Legend advisors, they have clients with assets that they can now try and capture more of through access to our products and services.”
“For decades, we have prided ourselves on providing premium services and support, and we believe this transaction will further enhance our ability to deliver premier solutions to our advisors and their clients,” said Legend CEO Mark Spinello, in a statement. “Joining First Allied aligns us with a partner company that shares our independent roots and our business goals.”
The purchase price was not disclosed. However, Waddell & Reed—in its third-quarter earnings release on Wednesday—said it agreed to sell Legend on Monday and is taking a noncash charge in the current quarter of $42.4 million related to a write-down of Legend as a result of the sale.
In 2000, certain Legend Group assets were bought for a maximum price of $75 million, according to SEC documents filed at the time by Waddell & Reed. (Waddell & Reed said the 2000 purchase price included a one-time payment of close to $58 million plus up to $14 million over a three-year period.)
“The sale of Legend reflects our desire to emphasize our core business,” said Hank Herrmann, chairman and CEO of Waddell & Reed, in a the press release issued by First Allied. “We appreciate the efforts of the Legend team over the past 12 years and wish them continued success in their new alliance with First Allied.”
Waddell & Reed also shared this statement with AdvisorOne on Thursday: "Waddell & Reed Financial acquired Legend in 2000, and our partnership with them has been productive. However, at this time, we believe our strategies and resources are better focused on our core advisors, wholesale and institutional businesses. We believe this transaction is in the best interest of all parties."
More Deals to Come
This type of transaction is essential for First Allied and for other independent firms of its size, according to the company chairman.
“We look to combine the best of both worlds,” Marks said. “Margin compression in this business is getting bigger, so you have to grow. It is not an option … We can help our advisors and theirs grow their respective businesses and fuel same-store sales growth on both sides, too.”