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Blucora Shareholders Vote to Elect All Existing Board Members

The results deal a blow to RIA and investor Ancora, which launched a proxy battle with Blucora, parent of broker/dealer Avantax, in mid-March, seeking four seats on the company's board.

After a month-long public proxy battle with RIA and investor Ancora, Blucora shareholders voted today to reelect all 10 of the company’s existing directors by a wide margin, according to preliminary results.

That includes Chair Georganne Proctor, former CFO of TIAA-CREF; Chris Walters, president and CEO of Blucora; Steven Aldrich, former chief product officer at GoDaddy; Mark Ernst, managing partner at Bellevue Capital LLC, a private investment firm; Carol Hayles; former CFO of CIT Group; John MacIlwaine, former vice president and CTO at Braintree; Tina Perry, president of the Oprah Winfrey Network; Karthik Rao, COO for Nielsen Global Media; Jana Schreuder, former executive vice president and COO of Northern Trust Corporation; and Mary Zappone, CEO of Brace Industrial Group, an industrial services company.

“Blucora’s board and management team thank our stockholders for their engagement, feedback and attention to the annual meeting election,” the company said in a statement. “We have learned from our dialogue with our stockholders and appreciate the continued support. We know we have substantially more work to do, but we appreciate the recognition from our stockholders that Blucora is a profoundly different and stronger company than it was just a year ago.”

Ancora sought four seats on Blucora's board of directors, and had nominated its CEO, Fred DiSanto; Cindy Schulze Flynn, the chief marketing and communications officer for Union Home Mortgage; Robert D. MacKinlay, CFO for Gardiner Service Company; and Kimberly Smith Spacek, a partner with Owl Creek Asset Management.

“We thank our fellow stockholders for their engagement and support in recent weeks," Ancora said, in a statement. "Although we are disappointed with the outcome of this contest, we are committed to remaining an engaged stockholder of Blucora. We urge the Board of Directors to reflect on the pressing issues at hand and objectively assess all paths to unlocking value. In light of the strategic interest in the company, as recently reported by Bloomberg News, we expect the Board of Directors to thoroughly evaluate any bonafide offers for the company (in whole or its parts).” 

“I‘m glad that my fellow shareholders agreed with me and voted in favor of the management-recommended board slate,” said Jonathan Foster, president and CEO of Angeles Wealth Management and a vocal supporter of current leadership. “Successful equity investment is a long-game. Todd Mackay and his team are on the right path to long-term success for the clients and the advisors. When it works for these stakeholders, it will work for shareholders too.”

Ancora launched a public proxy battle with executives at Blucora, the parent company of tax-centric broker/dealer Avantax Wealth Management, in mid-March. Ancora, an $8.7 billion AUM investment advisory firm that owns about 3.4% of Blucora's shares, argued the current management team was failing to find promised synergies between Avantax, Blucora's strategic roll-up of tax-focused broker/dealers, including HD Vest and 1st Global, and Blucora's legacy professional tax software business, depressing the stock price. 

The mismanagement was also alienating Avantax's advisors, Ancora said, sending many fleeing for other broker/dealers.

In interviews with, advisors who recently left Avantax said service levels suffered, payouts declined and fees rose after Blucora acquired and combined their broker/dealers.

But Avantax President Todd Mackay said the firm’s financial advisors are his top priority, and they have direct access to him and his leadership team. He said the firm has implemented several ways for advisors to provide feedback and influence change at the broker/dealer, and it’s investing heavily in service and technology. For example, Avantax recently announced its acquisition of GuideVine Technologies, a lead-generation and marketing technology platform for financial advisors launched in 2014.

One particular pain point for advisors was a $60 annual fee implemented last year on advisors for mutual funds held directly at fund companies versus in brokerage accounts or separately management accounts. Ancora primarily blames that “ill-conceived initiative” for the brokerage’s attrition problems, according to a 73-page investor presentation.

DiSanto had said his first move as a board member would be to cease and desist that annual charge.

Mackay defended the directly held mutual fund fee. “Our pricing model is designed, like many others in the industry, to incentivize growth and let our financial professionals reach their goals while serving their clients,” Mackay said. “We marry that pricing approach with innovative products and investment solutions. Many of those products are things that other broker/dealers don't provide that gives value back to both the financial professional and the end client.”

He points to the firm’s new brokerage IRA with zero custodial fees for low-balance accounts, as an example. 

The proxy battle had seen ongoing blows coming from both sides. In late March, Ancora sent a Q&A with its four nominees to shareholders, outlining their experience in the wealth and tax industries. Days later, Blucora sent its own letter to shareholders touting the experience of its existing board members and criticizing Ancora’s nominees.

The Blucora letter said that under the current board of directors, the firm has executed on its tax-focused strategy and that its share price has outperformed the S&P 500 by 72% over the past six months.

Then in response, Ancora issued a letter to shareholders, urging them not to be misled by the company’s promise of a new strategy. Ancora argued that Blucora has been working on its wealth management and tax preparation business model as far back as October 2015, with poor results.

Ancora also released a 73-page presentation, further outlining its case for change at Blucora. The presentation said that since Chris Walters became CEO in early 2020, total stockholder returns are down 30%.

The deck also said Avantax has lost about 700 advisors over the past four years; the b/d now has about 3,700 advisors. Ancora estimates that the b/d suffered a net loss of 100 advisors over the past 12 months; despite that, Mackay says the firm recruited 210 new advisors to the firm last year. Recently, the firm brought on Legacy Capital Advisors, an Atlanta-based team with $126 million in client assets, from LPL Financial. The firm also recently recruited Maestro Wealth Advisors, a Winston-Salem, N.C., practice with more than $133 million, from World Equity Group.

An investor presentation filed by Blucora said, “Some attrition among financial professionals is natural, healthy for the business and expected.”

The attrition was driven in part, the company says, by its own efforts to cull inactive and less productive reps. Mackay points to the fact that the b/d’s production retention rate has remained at or near 99% since the beginning of 2019. It dipped to 96% in the fourth quarter 2020.

The company also points to post-acquisition attrition, which can run at 10% to 20% of financial advisors associated with acquired firms, the deck said.

Some of that attrition is also due to tax professionals who added wealth management services and then later decided to drop it to focus only on tax planning.   

The attrition could also be attributed to CPAs retiring from the business and transferring their assets to another financial professional. That reduces head count, but not assets, Blucora said.

Last week, Blucora’s former CEO, John Clendening, who abruptly stepped down from that firm in January 2020, came out with his own statement, accusing his former employer of filing “inaccurate and misleading 8-Ks” in its response to Ancora’s charges. In essence, those recent filings rewrite history, he said, criticizing the company’s strategy under his management in contrast to the more positive statements found in filings to the Securities and Exchange Commission made at the time.

On April 9, independent proxy advisory firm Glass Lewis recommended stockholders vote for all Blucora director nominees, and it rejected all of Ancora’s nominees.

Institutional Shareholder Services, another proxy advisory firm, also released a report that week, recommending stockholders vote for Ancora’s nominees and endorsing the RIA’s case for change.  

Antitrust lawyer William Baer released an analysis April 12, saying that the election of DiSanto to the board would be a violation of the Clayton Antitrust Act, which prohibits officers, directors and employees of a company from serving on the boards of competitors.

“After reviewing the self-serving and presumably costly antitrust analysis released by Blucora this morning, we are left with one conclusion: this represents a transparent attempt to distract and mislead large institutions on the heels of Institutional Shareholder Services, Inc. recommending on Ancora’s proxy card and for the election of Mr. DiSanto,” Ancora said in a statement. “Unfortunately, we are not surprised by this escalation in light of what we have recently heard from third parties, who informed us that Blucora has been privately slinging mud at our nominees in hopes of accusations becoming public.”

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