As part of the ongoing trend of broker-dealer consolidation, Securities America says it is poised to add up to 210 independent advisors and over $5 billion in client assets with a deal to buy some assets of Foothill Securities.
Securities America — which has some 2,000 affiliated reps, is based in Nebraska and is owned by Ladenburg Thalmann Financial (LTS) of Florida — says that Foothill has about $38 million in yearly revenue. It was founded in Silicon Valley in 1962 and has advisors in 12 states.
The deal comes together as smaller broker-dealers face increasing compliance costs, such as those associated with the new Department of Labor fiduciary rule, which reinforced Foothill’s decision to find a buyer, according to President and CEO Steve Chipman.
(The industry shifts are also prompting insurance firms to get out of the business. For instance, AIG is selling the Advisor Group of indie broker-dealers to the private-equity firm Lightyear Capital.)
Securities America “will offer our advisors additional compliance support, better technology, broader asset management resources and practice-management programs for the full practice life cycle,” said Chipman, in a statement on Friday, adding that the broker-dealer has been actively seeking a larger firm to acquire its assets for several months.
The Foothill executive also believes the deal makes it attract to prospective advisors. After the purchase is completed, advisors “will still receive the close-knit culture and personal attention of our branch support team. Securities America, like Foothill Securities, understands the importance of the advisor’s role in helping clients achieve their financial goals,” Chipman explained.
“We’re pleased Foothill Securities chose to partner with Securities America on this important decision,” said Securities America CEO and President Jim Nagengast, in a statement. “Foothill’s advisors can be confident they’re joining a broker-dealer with the right people and resources to help them promote and grow their practices.”
Securities America says this purchase represents its eighth deal, and in these acquisitions some 900 advisors with $12.6 billion in assets and some $114 million in yearly revenue have joined the firm.
“We have a very sophisticated and detailed process to efficiently work through all the details and requirements associated with this type of transaction,” said Gregg Johnson, head of branch office development and acquisitions, for the IBD, in a statement. “Our project list includes more than 750 tasks across 12 departments, led by a cross-departmental team of more than 25 employees.”
In 2014, for instance, Securities America bought some assets from Sunset Financial Services, which was then owned by Kansas City Life Insurance Company. Sunset has roughly 270 registered reps, $2.4 billion in assets and some $18 million in yearly revenue.
Earlier this month, Securities America agreed to pay over $1.5 million in restitution tied to mutual fund overcharges paid by 1,514 clients over six years, according to the Financial Industry Regulatory Authority.
Ladenburg Thalmann, which does not break out the revenue and profits of Securities America, said it had a loss of $25 million and total revenues of $270 million in Q2’16; sales were down 9% from Q2’15. Commissions declined 11% year over year to $127 million, while advisory fees weakened 6% to $112 million. Service-fee revenues also declined by 3% to $20.8 million. However, the firm insists its Independent Brokerage and Advisory Services business (IBD) “continued to perform well during the second quarter, growing advisory assets under management despite challenges that impacted revenues across the sector. We were also pleased to improve margins in our IBD business through continued focus on expense reduction and harvesting synergies,” said Dr. Phillip Frost, chairman, in a statement.
“The firm is preparing for the implementation of the upcoming Department of Labor fiduciary rule and will continue our track record of providing industry-leading support to our network of 4,000 independent financial advisors,” Frost added.
Across the company, client assets stand at $128 billion at June 30 on par with year-ago assets; cash balances are roughly $4.4 billion. The financial group also says that in Q2’15, recurring revenue represented 75% of the independent brokerage and advisory services business.
Ladenburg’s operations include Securities America, Triad Advisors, Securities Service Network, Investacorp and KMS Financial Services, as well as Premier Trust, Ladenburg Thalmann Asset Management, insurance broker Highland Capital Brokerage and the investment bank Ladenburg Thalmann.