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Whither the Independent B/D?

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Furthering the consolidation trend in the independent broker/dealer industry, Securities America Financial Corp. has agreed to acquire Folsom, California-based Brecek & Young Advisors, Inc. from Security Benefit Corp. (SBC) of Topeka, Kansas. Terms of the transaction were not disclosed, and the transaction is still subject to regulatory approval.

According to a joint release on August 5, Brecek & Young Advisors’ employees and advisors will become affiliated with Securities America in late 2008. The addition of Brecek & Young Advisors represents $42 million in gross revenues, more than $1.3 billion in fee-based AUM, and more than 300 producing reps, the companies said in the release. After the transition, Securities America will count about 2,000 independent advisors with an estimated $550 million in revenue, and $15 billion in fee-based assets.

The acquisition was the second within a month among independent B/Ds. In July, First Allied Securities agreed to acquire First Montauk Financial in a deal that is expected to close by year-end.

Chris Ranney, president, chairman, and CEO of Brecek & Young, said in an August 7 interview that Brecek’s parent, Security Benefit Corp., “decided it was in the best interest of all parties to find a new owner for Brecek & Young, an owner with a core competency in the broker/dealer and investment advisor marketplace.” Ranney–who has “enthusiastically” accepted an executive leadership position with Securities America–says he’s been witnessing consolidation in the independent broker/dealer market for the past number of years, with “dual registrant broker/dealers and RIAs aligning themselves with larger firms that have more expertise, technology, resources, and capital to provide more and better services to their representatives.” Brecek & Young and Securities America have very similar services, particularly in serving their advisors and in wealth management, Ranney says. Brecek will be able to leverage “the technology, practice management training, and coaching programs that Securities America is renowned for,” he says, while Brecek’s popular internal asset management program, Iron Point Capital Management, will be available to Securities America reps.

Ranney also notes that Securities America has “recognized” the talented reps at Brecek & Young’s Folsom and Cincinnati offices, and “has made it very clear that they are committed to maintaining” those offices.

Philip Palaveev, formerly with Moss Adams and now president of Fusion Advisor Network in Seattle, notes that this is the first acquisition for well-capitalized Securities America. “They are trying to grow,” he says. Consolidation is, indeed, taking place in the independent broker/dealer world, Palaveev says, but this means the “boutique broker/dealer is almost disappearing.” Independent B/Ds that come to mind–those closely owned by their management team or owners, and not owned by a large corporation or insurance company–include firms like Commonwealth, NEXT Financial, and Geneos, he says. “If you are an advisor today who wants to be part of a relatively smaller, non-corporate broker/dealer, where do you go?” Palaveev asks. “Seems like you can choose from a very large investment corporation like LPL, or a very large insurance corporation like MetLife, or a large distribution conglomerate like Securities America.”

But that’s not to say that independent B/Ds are dying off completely. In fact, both Geneos and NEXT Financial were started fairly recently, Palaveev notes. “We continue to see new broker/dealers coming successfully into the market and being successful. So we’re not done seeing changes in the industry.”