AGE buyout? RJ?

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Oct 12, 2006 2:49 pm

I am being heavily recruited by a bunch of firms.  Through this "process" I've been told a lot of things (as in "we'll give you the moon" or "you'll be up to $1M with us in no time"...yada...yada...yada).  But I have heard more than once that AGE and/or Raymond James are on the verge of being bought out.  Wachovia/UBS/MS being the buyers.  Anyone else heard these rumors?? Or are these rumors been around for years??


Stan

Oct 13, 2006 12:26 am

I have heard the same thing and have asked the same questions- especially with all the regional buy outs of firms (Legg Mason, Piper, Advest, MacDonald, etc).


UBS and Wachovia seem to be in a bidding war for buying firms. UBS is not interested in the indy firms, but Wachovia has a few in sight, such as RJ and a few other good fits (no, not LPL)


AGE is running out of money to invest back into it self to remain competitive, especially in the technology arena and competitive product offering. They have a similar culture to Wachovia so perhaps a fit, perhaps not. My best friend just left AGE after 12 years with them for this reason.


CEO's talk to CEO's- everyone looking for a good deal. I would not be surprised if at the end of the day (or next 5 years) we have 2-3 big wirehouses and the independent arena. That's my take on it, for what it's worth.

Oct 13, 2006 1:14 am

WealthAdvisor- you almost seem like you know what you are talking about-


I agree with "most" of your opinion- and here are some things to think about (and I am absolutely new to this forum but not the industry). Let's take a look at issue with firms and potential outcomes:


Morgan Stanley- why 200% deal with 1.8% profit margins? Can you say- fire the bottom, bring in talent, increase FA avg production, move deal money to another line on the balance sheet, prep for sale based on one of the highest average production in the industry (by suckering in big producers with big deals and 7-9 yr locks ins), all for the inevitable benefit of management and inconvenience of the FA and clients (being acquired is not a fun event for a book!)


AGE- I agree with you- great culture actually, but no economy of scale. Will eventually be bought I think- and Wachovia may be a better fit than UBS and they seem to be the two biggest firms for acquisitions (Wachovia doing the biggest in history 2 years ago with Prudential).


UBS- why are they buying so many firms up and offering sick upfront dollars? Perhaps a strategy by the Swiss? Could it be that they will take the last 10% of the company (UBS Financial Services) and take the incentive comp away and actually do what the rest of the firm does (salary plus bonus) to incentivise the behavior it wants FA's to have. Hmmmm- you might say FA's will have a mass exit from the firm, but statistics say they won't and many won't be able to afford to because they spent the upfront lock in. Additionally, the legal dollars saved by paying the FA to truly be on the same side of the table as the client is very appealing if it pans out.


Merrill Lynch- should have been bought up by now but who would want the culture? Advest merger was a BOMB! They need some more capital behind them to stay competitive over the next 5 years. Either they buy or get bought- stay tuned. Total Merrill is losing their competive edge to their own arrogance I think.


SB- will Citigroup continue to invest in the company that has only a 10% contribution to the bottom line? Is the risk worth the reward? If so, will they continue to tighten up on the FA and give he/she little wiggle room to make mistakes? Yep- looks that way. SB FA's are probably some of the best FA's in the industry (an my favorite to recruit) yet they are abuses and misused by their firm.


DA Davidson- see ya, wouldn't want to be ya! Follow the leader- Legg Mason, Advest, Piper, MacDonald, DA Davidson? The acquirer could be the writer of the biggest check and the largest retention package- Piper had 70% deals with 100% exceptions, followed by MacDonald at 100% deals. What's next?


RBC Dain Rauscher- Does the Royal Bank of Canada keep the firm or unload it and just maintain the clearing service? I actually have not idea, but did not want to leave them out. They seem to be losing steam and have lost the competitive edge.


DB Alex Brown- how does a firm with the average producer at over a million $ lose FA's? Well, focus on institutional biz and leave out the retail FA AND don't invest in the retail platform and you have a recipe for attrition.


Raymond James- Does Tom take a buyout and run, or does he leave a legacy? Only Tom knows but as notes above- a few firms probably would be a good fit to acquire (and I don't mean venture capitalists). Who else has similar structure and choice they do? Gee- that's a tough one.


LPL- The acquisition by the venture firms with some "retention" incentives and a new pay scale that benefits extraordinary performance smells like something is brewing. They are also focusing on cutting the part timers out and tightening up the supervisory arm, not to mention other places. At single digit profitablility (which is unacceptable for an IPO), seems that some significant changes will be occurring over the next 18 months to get them in shape to make people money in either an IPO or other structuring. Getting the balance sheet fit for public ownership will mean cost cutting and/or fee hiking such as ticket charges, admin fees, etc (maybe).


Commonwealth- good firm, middle of the class rung. No real economies of scale. Simon says they will be bought at some point- sooner rather than later.


If I left anyone out it's because to comment would be a conflict of interest because I actually do know what I am talking about . .  it's my living to.

Oct 13, 2006 8:49 am

I also would agree with Davidson.  They are in a spot where their asset management division has lost a significant amount of top clients (institutional) and a number of key professionals have left within the past couple of years.

Oct 13, 2006 9:40 am

I have had my concerns since LPL sold a major stake to the LBO firms.  However, if they fiddle too much with comp(negatively) or increase fees to clients too significantly, they'll simply start to lose advisors.  That would be the difference between our business structure and that of UBS, AGE, or Morgan Stanley Dean Witter.  There are no 7-9 year 'deals' to lock in advisors.  Just the hassle of moving, which isn't really that bad if you're organized.  So, to some extent, that should keep management "honest".

Yes our margins may be smaller, but our revenues have been growing steadily, and when you look at our percentage of AUM in fee business versus commission business, we compare well to just about ANY other firm.

Oct 13, 2006 2:54 pm

Okay Hardcorp- I'm usually not easily impressed  . .  but I'm impressed. My hats off to your assessment/opinion. So, who's your picks for college football this weekend?

Oct 13, 2006 3:36 pm
joedabrkr:

I have had my concerns since LPL sold a major stake to the LBO firms.  However, if they fiddle too much with comp(negatively) or increase fees to clients too significantly, they'll simply start to lose advisors.  That would be the difference between our business structure and that of UBS, AGE, or Morgan Stanley Dean Witter.  There are no 7-9 year 'deals' to lock in advisors.  Just the hassle of moving, which isn't really that bad if you're organized.  So, to some extent, that should keep management "honest".

Yes our margins may be smaller, but our revenues have been growing steadily, and when you look at our percentage of AUM in fee business versus commission business, we compare well to just about ANY other firm.


LPL has no "franchise."  Their model appeals only to retail, and retail doesn't have a clue to who they are.


Knowing that the advisors are free to leave whenever they want to is going to make it a very difficult firm to build and IPO around, especially at the end of a bull market when the business is contracting and the blood is running in the street.