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Avantax Wealth Management

Avantax’s Advisor Headcount Declines, Recruited Assets Rise

Avantax said the decline was due to attrition of lower producing advisors as it moves closer to finalizing a sale to Cetera later this month.

Total advisor headcount at Avantax stands at 3,111 at the end of the third quarter, down slightly from the second quarter and about 7% from the year-ago period, the firm said in its most recent quarterly report. The decrease was offset by onboarding new advisors, adding a record $564 million in recruited assets during the quarter.

In a public filing, Avantax attributed the decline in headcount to attrition of lower revenue-producing advisors. It said it terminated some lower-producing advisors in the fourth quarter 2022 who failed to comply with the firm’s policy on record keeping and supervision.

The publicly traded wealth management firm, formerly known as Blucora, did not hold a conference call with analysts this week, as the firm prepares to sell to Cetera Financial, expected to close this month. Avantax will be de-listed from the Nasdaq exchange and become a standalone business unit within the Cetera ecosystem, with Cetera retaining the company’s core technology, legal entities, product offerings and clearing and custody relationships.

The Cetera deal values Avantax at $1.2 billion, and shareholders will be cashed out at $26 a share, pending their approval. Avantax shares closed trading at $25.90 on Monday.

Avantax reported $673 million in net new assets for the third quarter, bringing its total client assets to $82.3 billion, down from nearly $84 billion in the second quarter, and up from $72.6 billion in the year-ago quarter. The firm said advisory assets decreased $700 million during the quarter due to unfavorable market changes.

Jeff Schmitt, a research analyst at William Blair, pointed to the firm’s strong organic growth in the quarter of 3%, compared to 1.5% in 2022 and -2.5% in 2021, “driven by productivity gains, scaling the captive RIA, and a better recruiting strategy.”

“All in all, it was a strong quarter highlighted by improving top-line momentum,” he wrote in an analyst note. “As we look ahead, we expect further improvements in organic growth as the company continues to scale the captive RIA and enhance recruiting.”

The firm reported total revenue of $192.3 million for the third quarter, up 16.5% year-over-year, beating analysts’ expectations by $740,000, according to Non-GAAP earnings per share was $0.36, up 125% from a year ago, beating analysts’ expectations by 7 cents.

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