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Industry Spotlight > Mergers and Acquisitions

Waddell & Reed to Slash More Than 200 Jobs Following LPL Deal

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What You Need to Know

  • The planned move of the broker-dealer's Kansas headquarters has been scrapped.
  • “There is always collateral damage when firms are acquired, merged or sold,” consultant Tim Welsh says.
  • Those losing their jobs are eligible for financial and non-financial severance benefits, including subsidized healthcare, according to a W&R spokesman.

Waddell & Reed is slashing 219 jobs and will not be moving its corporate headquarters in Kansas following LPL Financial’s deal to buy its wealth management unit from Macquarie Group for $300 million, W&R and Macquarie said Monday.

“We can confirm that 219 is the number of employees impacted at Waddell & Reed Financial,” a W&R spokesman said, following the company informing the Kansas Department of Commerce about the planned cuts on Feb. 26. The main details of that notice are listed on the Kansas Works website.

The Kansas City Star was the first to report the planned W&R job cuts, on March 2.

Industry Reactions

The planned job cuts did not exactly come as a surprise. After all, “from what we are seeing in the marketplace, cost cutting is king” today, according to Jon Henschen, president of recruiting firm Henschen & Associates.

Cost cutting has been in high gear after sales, as we saw with the Advisor Group’s hasty consolidation of three midsize broker-dealers into Securities America shortly after the Ladenburg sale closed” in early 2020, he told ThinkAdvisor on Monday. That followed Advisor Group’s announcement in late 2019 that it was buying Ladenburg Thalmann’s BD operations.

Layoffs of rank-and-file employees after an acquisition are “all too common,” Henschen said. “LPL will have no use for staff or infrastructure, as the purchased advisors will be folded into their own infrastructure eliminating redundancies.”

Echoing Henschen, Tim Welsh, president, CEO and founder of consulting firm Nexus Strategy, told ThinkAdvisor: “There is always collateral damage when firms are acquired, merged or sold  — and a lot of that employee turnover is allocated to ‘deal synergies.’ There are always overlapping departments, functions and staff that can be eliminated as the combined organization rationalizes itself.”

However, “the good news is that the industry is still growing, so my guess is that those let go will be in high demand,” Welsh said.

More Details on Cuts

When asked about the job cuts, a W&R spokesman said: “Macquarie, Waddell & Reed and LPL are committed to taking a very careful and thoughtful approach in bringing together the capabilities and resources needed to help advisors, intermediary partners and their clients achieve their investment objectives while delivering exceptional service.” 

As for those losing their positions, “All affected employees will be eligible for comprehensive financial and non-financial severance benefits, including continued subsidized health care and outplacement services to assist them in securing new jobs,” he told ThinkAdvisor on Monday. 

“While we cannot offer further specifics, there are no changes” planned to Waddell & Reed’s Ivy Funds “at this time,” the spokesman said. “Ivy investment teams are expected to manage their portfolios following the close of the transaction.”

In terms of the planned move of its headquarters from Overland Park, Kansas, to Kansas City, “while we can confirm that we will not be occupying the new building, Macquarie and LPL remain committed to the region and supporting the needs of our clients and staff here,” a Macquarie spokesperson explained. 

However, the spokesperson added: “It is our understanding that construction on the building at 1400 Baltimore [Ave. in Kansas City] will continue.”

Latest LPL, Retention Updates

LPL Holdings, a unit of LPL Financial, said last week that it is expanding its revolving credit facility from $750 million to $1 billion and refinancing its existing $900 million senior unsecured notes due in 2025.

As part of these moves, LPL Holdings plans to offer about $900 million in senior unsecured notes with maturities dependent on market conditions. The aggregate amount of LPL’s outstanding debt “would be substantially unchanged as a result of the transaction,” the firm said Thursday.

In February, LPL President and CEO Dan Arnold said that W&R advisors who manage about 80% of that unit’s client assets have “already committed to join our platform” following the close of the deal.

The 80% retention “puts us above our 70% modeling assumption thus far in the process,” according to Matthew Audette, LPL’s chief financial officer. Waddell & Reed Wealth Management assets at the end of Q4 were $70 billion, up $7 billion from Q3, he noted.

At the time the deal was announced last year, W&R’s business had about 921 independent advisors and $63 billion of assets, while LPL had some 17,200 financial advisors.