Securities America Denies Charges of Departing Reps

Despite word that Securities America and Ameriprise Financial “made substantial progress” in mediation of a class action suit against the broker-dealer over the sale of certain Reg D securities from Provident Royalties and Medical Capital Holdings, the overall environment at Securities America has deteriorated markedly, with several advisors leaving in April and more set to leave soon, according to a departing Securities America rep and a veteran recruiter.

The news and conversations have “caught everyone off guard, and they are all freaked out … and have begun having meetings” about their next steps, the departing advisor, who has more than 20 years in the business and several years with Securities America, said in a phone interview with Investment Advisor. “There’s a feeling that Securities America cannot last long, maybe two to three months or less, depending on what happens.”

In an interview in late March, Janine Wertheim, Securities America’s senior vice president and chief marketing officer, denied that any of its reps had left the broker-dealer “over the past few weeks because of these events.” In fact, she said that Securities America has “experienced a positive net gain” in the number of reps in 2011, and that its advisors have been “incredibly supportive of us.” There has been only one loss in the “last couple of weeks” of an advisor, she said, and that was a termination due to a “change in business model” at that rep’s practice.

A series of conference calls led by Wertheim and CEO Jim Nagengast between the broker-dealer, Ameriprise Financial and attorneys for plaintiffs in the suit led to “substantial progress,” Wertheim said in an emailed statement. Moreover, she wrote that “all interested parties have committed to a process that we hope will result in a full and final resolution of these matters.”

The company has declined to share other details about the negotiations. It also insists that its advisors are not departing due to the lawsuit.

What the Recruiters, IBDs Are Saying
A veteran recruiter confirmed the situation as described by the Securities America rep. “Some reps are already leaving, some will do so in the next couple of weeks and others in the next couple of months,” the recruiter said in a phone interview with Investment Advisor on March 28. “They all pretty much have a plan B, with some saying this is a good time go.”

Still, the recruiter says, those advisors with large books of business “see switching firms as a Herculean task and hope things work out.”

The recruiter is in contact with about 25 Securities America advisors of whom two-thirds want to move regardless of the outcome of any negotiations involving Ameriprise Financial.

And other broker-dealers are getting calls, too.

“We are currently in conversation with some advisors from Securities America who have reached out to us,” said Robert Foney, chief marketing officer of Investors Capital, in an interview. “Our five-star service model is perfect for them as well as for any advisor with an acceptable U4 and business mix, producing over $100,000 per year,” added Foney.

At least one recruiter, though, says there may be a silver lining for Securities America.