Advisor Group has penned a deal to acquire Ladenburg Thalmann and its five broker/dealers through a cash merger, creating a b/d network with 11,500 advisors and over $450 billion in assets. Ladenburg’s b/ds will not be merged with Advisor Group’s.
“The combined company will be, by far, the largest multi-custodial and multi-clearing enterprise in the independent wealth management space,” said Larry Roth, managing partner of RLR Strategic Partners. “This is going to create significant new opportunities for its financial advisors, while establishing Advisor Group as a very credible competitor to the largest firms in this industry.”
The total value of the deal is $1.3 billion, including Ladenburg stock, preferred stock and outstanding debt. Outstanding shares of Ladenburg stock will be converted into a cash payment of $3.50 a share, a 23% premium to where the stock was trading before the announcement.
WealthManagement.com reported earlier this month that the two companies were reportedly in exclusive talks to negotiate a deal.
Ladenburg has strategically acquired large independent broker/dealers over the years; it now has five b/ds, including Securities America, Triad Advisors, Investacorp, Securities Service Network and KMS Financial Services, and roughly 4,700 advisors. Between 2016 and 2018, the firm added $380 million in advisor revenue.
Advisor Group’s b/ds include FSC Securities Corporation, Royal Alliance, SagePoint Financial and Woodbury Financial. In May, the firm was sold to private equity firm Reverence Capital Partners.
Both firms clear through Pershing and National Financial, so there will be no repapering of client accounts. Advisor Group CEO and President Jamie Price will continue to lead the organization, and the leadership team will consist of executives from both firms.
Price said it’s too early to consider whether Ladenburg advisors will be offered some kind of retention package; he implied there was little need for it since the two are on the same clearing platforms and there will be no account number changes for clients.
“If we thought there was opportunity to do that or it was needed in some way, shape or form, I wouldn’t rule it out,” Price said. “But at this point, that isn’t readily apparent or necessary because there’s no change for the advisors.”
He said the transaction would be different from LPL Financial’s acquisition of National Planning Holdings, another b/d network, that was absorbed into the firm and had lower-than-expected retention of advisors. The big difference is that unlike LPL, Advisor Group is not self-clearing, and as advisors will remain under the same clearing arrangements, there should be no disruption to client accounts.
About a year ago, Ladenburg started to move increasingly toward shared services across all its b/ds.
“The tie-up with Advisor Group, who’s significantly further ahead in that process and has so many tools and resources and things directionally that we were headed to in terms of our technology platform, they already had in place,” said Dick Lampen, Ladenburg chairman, president and CEO. “It’s going to speed up where we had been trying to get to on a standalone basis.”
Advisor Group already has some shared services, which it expects to implement across the Ladenburg b/ds, including its eQuipt digital client onboarding system, the MyCMO digital marketing platform, its succession planning offering MySuccessionPlan and its CyberGuard Program for cybersecurity.
Meanwhile, Advisor Group’s advisors will now have access to Ladenburg’s insurance brokerage, investment banking capabilities and trust services.
The RIA-Only Offering
Advisor Group also sees the deal as a way to build out its registered investment advisor-only offering, which some other IBD competitors are doing. Ladenburg subsidiary Triad Advisors, for instance, was an early entrant into the space, created in the late 1990s as a channel for hybrid and RIA-only advisors.
Securities America also provides a similar type of support for RIAs through its Arbor Point platform. Arbor Point, formed via a joint venture between Securities America and NorthStar Financial Services Group, is an RIA platform that allows advisors to use multiple custodians while retaining their commission-based business. The firm serves hybrid advisors who want to own and operate their own privately branded firm, but don’t want the operations and compliance burdens.
Price also believes Advisor Group’s outsourced regulatory and compliance offering will also be attractive to RIAs.
“One of the largest expenses the RIA-only channel has—and it’s getting steeper by the minute—is regulatory and compliance as it relates to SEC and SEC audits and filings,” he said. “The ability to outsource that to us and us to leverage scale from a pricing standpoint to offer it, I think is a big opportunity.”