One day after the American International Group-owned Advisor Group said it was acquiring Woodbury Financial Services from The Hartford, top executives at the two independent-advisor firms say they are confident that the firms’ retention efforts and mix of business skills will lead to increased sales.
“We were very transparent with advisors and upfront with them” since Hartford went public with plans to exit the variable annuity and life insurance fields in late March, said Patrick McEvoy, president and CEO of Woodbury Financial Services, in an interview with AdvisorOne on Wednesday. “We all agree to overcome three challenges for advisors with this transition: Keep the Woodbury culture, minimize paperwork and distractions for them and their clients and maintain an independent environment.”
The alignment with the 4,400-rep Advisor Group should help Woodbury deliver on these promises with its 1,400 advisors, McEvoy adds. “We are very excited and are getting good support and plenty of congratulations in our calls with advisors,” he said.
Neither McEvoy nor Advisor Group head Larry Roth, who is in charge of the umbrella organization for broker-dealers FSC Securities, Royal Alliance and SagePoint Financial, would disclose the details of any retention arrangements or the number of bidders involved in its acquisition. (The deal should close by the end of 2012, subject to regulatory approval and associated conditions.)
McEvoy said it was a “long, arduous process.”
“The Hartford made a commitment to consider all stakeholders, and it delivered on that by putting us in the hands of the Advisor Group,” he said.
According to McEvoy, the average level of production, or yearly fees and commissions, for its advisors was about $170,000 in 2011—“a significant rise over the year before,” when production averaged $147,000. And Woodbury advisors have a fairly diverse book of business already, according to the Woodbury executive, who is based in Oakdale, Minn.
“We work with plenty of mid-America clients on their retirement,” he explained. “Yes, this includes lots of insurance, but also wealth-protection products and guaranteed-income products. Life insurance and variable annuities are growing substantially on advisor platforms.”
For Roth, this is an area that can translate into sales growth for the broader Advisor Group reps, who have average production of about $170,000 to $180,000 a year. “This is one reason we are excited to have a new member of the family,” he said.
Of this overall Advisor Group production, about 35% of sales come from fee-based activities and less than 5% is insurance based. About 12% of Woodbury advisors’ sales are fee based.
“One thing we love is that Woodbury is very focused on financial planning and training that allows its advisors to know and learn about all the clients’ needs … and to support them with access to long-term care, guaranteed income and annuities that can serve the clients over the next 20 years,” explained Roth.
Thus, Woodbury can boost the Advisor Group’s retirement focus, while the Advisor Group can help Woodbury reps expand their fee-based wealth management results. “This will be one area that will be good for us as we look to grow the business,” said McEvoy. Advisor Group recently introduced its reps to a new wealth management platform. About $14 billion of the group’s $100-billion-plus assets are now on it. (Woodbury has total client assets of roughly $26 billion.)
Both executives expect further consolidation in the independent-advisor space. “We are working hard to attract small- and midsize firms and would love to acquire more firms and fold them into our operations,” said Roth.
The Advisor Group’s competitive strength, he says, is having a platform with a wide range of products and options in terms of clearing and custody arrangements for fee-based assets. “That’s our differentiator with advisors who are already successful,” said Roth, “and it contrasts with some of our competitors who emphasize giving advisors a different way to run their practice.”
Even though the Woodbury deal should require lots of its executive focus, Advisor Group still aims to recruit 750 advisors this year, he says. “We’re making great progress,” said Roth.
Likewise, McEvoy says his firm has a “good pipeline.” The Hartford’s announcement of the planned sale in March did affect its recruiting, he notes, “but we had big expectations in January and will strengthen these efforts now with our new story.”