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Retirement Planning > Social Security

Sale of Securities America: Advisors Should ‘Run,’ Recruiter Says

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With Ameriprise Financial poised to sell Securities America after a series of legal disputes and costly settlements associated with two sales of private placements, recruiters say that advisors now affiliated with the independent broker-dealer should proactively consider their options. And, for at least one veteran recruiter, this means moving quickly to a “safer, more secure” broker-dealer environment.

“I’d say run to the safest spot,” said Rick Peterson, a Houston-based recruiter, in a phone interview with AdvisorOne. “This could be to the largest IBD in the world, Linsco [LPL Financial], which has not had any of the issues” associated with private placement sales like Securities America.

The point, he says, is to be able to tell your client that you are moving to a larger BD to avoid potential problems that could occur when Securities America is sold. “And you want to go to a firm that has a larger presence in the market, like LPL, which just makes more sense,” Peterson said. “In the wirehouse channel, it would be like saying, ‘I’m leaving Morgan Keegan, for instance, to join Merrill Lynch or Morgan Stanley.”

While there is some speculation about LPL as a potential suitor, the fact that LPL, which includes about 12,550 advisors, is self-clearing could be a challenge for Securities America and its 1,840-plus advisors, who now clear through National Financial and Pershing.

"I don’t see LPL buying Securities America,” said recruiter Jon Henschen (left) of Marine on St. Croix, Minn. “When it bought the Pacific Life broker-dealers, which cleared through Pershing, things didn’t go well, and many reps left.”

Some potential buyers, he says, include the AIG-owned Advisor Group and its broker-dealers, Royal Alliance, FSC Securities and SagePoint Financial, which are “flush with money.”

“Also, Met Life is always looking … though it is quite frugal when it comes to acquisitions. And there’s Lincoln National, which clears through National Financial,” the recruiter explained.

There’s also the possibility that much larger firms with independent channels, such as Wells Fargo Advisors, or Raymond James Financial could bid for Securities America, says Peterson. And advisors could look to such companies as places to move to as well, he explains.

“Again, the idea for an advisor is to say to clients, ‘The independent channel is the right one for me and for you, but there is safety in numbers. And before my broker-dealer is sold by Ameriprise, I’d like to move my affiliation to this firm.’ Such a conversation would allow an advisor to have a better relationship going forward, I believe,” the recruiter said.

With a large firm, Peterson shares, advisors benefit from economies of scale. This is better for the business and the broker in the long run. “Financial advisors need be secure in their channel and the broker-dealer affiliation,” he said.

"Raymond James does not comment on rumor, speculation or any possible acquisitions but welcomes interest from high quality advisors at Securities America who seek an independent, conservatively managed firm, and who would appreciate our comprehensive platform and advisor-centric culture," said Chet Helck, the company's COO, left, in a statement.

LPL Financial and Wells Fargo said they do not comment on speculation of mergers and acquisitions.

Other Considerations


For both advisors who elect to move on now or for those who wait for the sale, one challenge is the same, says recruiter Bill McGovern, left, of St. Petersburg, Fla.: finding a parent company with a strong brand.  “They are used to having a parent company with brand equity behind them. Depending on the buyer – maybe ING, Jackson National or Cetera  – another firm’s brand equity could help. But few companies can compare to Ameriprise in terms of how well known it is and the advantage that this gives advisors.”

Like several other recruiters, McGovern does not expect LPL to step in and buy Securities America. “They have their hands full in my view with the public offering, associated issues and digesting other firms that had to be migrated over to the self-clearing platform,” he said.

Likewise, Raymond James would have to move brokers over to its self-clearing operations. “It would surprise me to see Raymond James bid on Securities America. This is a conservative firm,” McGovern said.

The Securities America reps do have some “baggage,” he adds, which could impact the IBD's sale. “Until the full liability, settlement and associated issues related to the current litigation [tied to the private-placement sales] and any other lingering matters are fully resolved, this could be a challenge,” McGovern said.

“While most of the advisors didn’t sell these products, if you buy the firm you either have to take on the liability of those that did or find some other way to sort it alll out,” the recruiter explained. As a result, some broker-dealers may just want to attract advisors from Securities America in a piecemeal fashion instead of buying the whole IBD.

Plan B

Another issue for Securities America advisors will be whether or not the acquiring firm offer retention bonuses, which can often be as much as 5% of trailing-12-month production over a three-year period for those with annual fees and commissions of $500,000 or more, adds Henschen. And advisors can – proactively – reach out to other BDs about such bonuses before the sale of Securities America takes place.

"Lot of [Securities America] reps are putting in Plan B, in my view, and as I hear it, they will pull the trigger sooner rather than later," said the recruiter, who adds that he is in touch with many SA advisors.

“I was a bit surprised that Ameriprise announced the sale before the settlement [associated with the private placements] was fully finalized,”  added Henschen, who is head of Henschen & Associates. “It must have been more important to announce it to shareholders with the first-quarter results”  than to have waited, he explained. 

Like other industry observers, McGovern said, “It's a bit sad to see a broker-dealer and its reps end up on the block like this because of bad products. Securities America has been around a long time, and like other firms, it’s had its share of problems.”

Fallout from private placements and other alternative investments was more common in the 1980s, he notes. “Since then, a lot of lessons have been learned. How did the IBD get here? Lots of us are scratching our heads. What could the broker dealer and its parent company have done to prevent this, and why didn’t they?”


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