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Advisor Group’s BD Consolidation a ‘Sign of the Times’

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Advisor Group said Monday that three of the five independent broker-dealers it bought recently from Ladenburg Thalmann will be merged into Securities America, the largest BD in this network.   

Industry watchers reacted to the news with a bit of a shrug, seeing it as part of the consolidation overall across the advisor landscape. Data compiled by the Financial Industry Regulatory Authority puts the latest BD tally at about 3,500, down from roughly 4,700 a decade ago.

This consolidation in the IBD space is another sign of the times,” said Tim Welsh, head of the consultancy Nexus Strategy. “With zero commissions, cash spreads at micro-levels and market lows, it is an incredibly challenging operating environment for broker-dealers, so the race to scale is on.”

Advisor Group, led by Jamie Price, says KMS Financial Services, Securities Service Network and Investacorp are set to become part of Securities America by year-end. RIA-focused Triad Advisors will remain a standalone BD.

“It comes as no surprise that following the merger they are consolidating five LTS broker-dealers to two,” explained Gavin Spitzner, president of Wealth Consulting Partners. “Given IBD market dynamics and the need to drive efficiency combined with the fact that they have made great strides in effecting common technology infrastructure, the table was set to do this in a way that didn’t negatively impact advisors or their clients.”

Price told ThinkAdvisor that Advisor Group made the move to avoid spending as long as two years to launch straight-through processing, digital signature and related technology for onboarding and client service across the five separate firms.

Securities America currently has about 2,600 advisors, while Triad has nearly 650. KMS, SSN and Investacorp have a total of about 1,000 advisors. After the BD closings and mergers, Securities America — led by Jim Nagengast — could have about 3,600 registered reps.

“Jim Nagengast is a personable guy, and under his watch [Securities America] has been well managed, compliance clutter has been kept to a minimum, and advisors have been very happy with back-office staff,” said Jon Henschen, head of the recruiting group Henschen & Associates. 

Looking ahead though, Henschen adds, advisors may grumble if their current staffing level of about five advisors to one employee rises to, say, nine or 10 advisors per staff member. 

Mixed Bag for Advisors?

“It’s not necessarily the case that all advisors [with the three BDs set to close] will be unhappy, especially if they don’t have to repaper clients and are already part of Advisor Group,” said Louis Diamond, executive vice president of Diamond Consultants.

“There are some positives with being part of a broker-dealer with more scale and support,” Diamond explained. With Securities American getting bigger, Advisor Group likely will invest more in its staff, departments and resources than perhaps it would have done in all five individual BDs.

“The flip side, as when Cetera reorganized its BDs a few years ago, is that there are always winner and losers,” the recruiting consultant said. In terms of advisor and staff displacement “it’s not clear yet who’s unhappy with the news and who’s not.”

Recruiters and other industry watchers, of course, will be watching as this situation progresses. And they could be busy with further consolidation on the horizon.    

More to Come

“I suspect we’ll see more, not less, IBD consolidation within Advisor Group and elsewhere in the space,” Spitzner said. “They can’t afford to support all these different brands and offerings and instead need to focus their efforts to benefit the overall network.”

Advisor Group also includes FSC Securities, Royal Alliance, SagePoint Financial and Woodbury Financial; they have a total of about 7,000 advisors.

Welsh agrees with Spitzner’s outlook. 

“I would expect this trend to continue, with the latest technology becoming the holy grail for IBDs to adopt to gain back operating efficiencies, lower costs and continue to improve both the advisor and client experience to attract and retain the best reps,” the industry veteran said.

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