Fort Lauderdale, Fla.-based Kovack Securities, a mid-sized independent broker/dealer with about 400 advisors, has acquired the assets of TKG Financial, a small firm in Santa Barbara, Calif., with about 15 advisors and $200 million in assets. The firm will move over in a block transfer, and join Kovack as a super office of supervisory jurisdiction. TKG will retain its current brand, management and offices.
“Smaller independent firms increasingly seek to eliminate rising b/d costs while maintaining their unique brands and communities of like-minded advisors,” said Brian Kovack, president and co-founder of Kovack Securities, in a statement.
The deal is the first of what Kovack expects will be multiple similar transactions the firm will undertake in the coming weeks and months. The firm has a second b/d acquisition in the works, which would be five times larger than TKG by assets under management. Kovack couldn’t name the b/d but said it would join under a similar structure by shuttering their b/d entity and staying completely intact as a super OSJ. A third transaction is also possible by the end of the year, he said.
“As a family-owned firm with a national footprint, a boutique advisor service culture and a commitment to long-term ownership stability, we offer a unique path forward for smaller firms that want to stay together as distinctive super-OSJ groups rather than get absorbed into a monolithic, large firm with thousands of advisors,” Kovack said.
He cites the increasing administrative and regulatory burdens, rising expenses (such as errors and omissions insurance), the need for better technology resources and the Department of Labor’s fiduciary rule as reasons TKG decided to get out of the b/d business.
“How to handle that DOL is also an increase in resources and infrastructure that, candidly, is a headache for them,” Kovack said. “Their vision is to recharge their value proposition to their advisors, which is, ‘We’re here to service customers. And to do a good job for them means that if we can offload some of these administrative burdens of running and operating a broker/dealer, that frees up time and resources for us to be a better advisor for our clients.’”
TKG was founded in 2001 by L. Keith Kelt, his son Landon Kelt, his daughter Whitney Kelt, and Derek Brumfield. While Kovack has a West Coast presence, this acquisition expands its footprint in the Santa Barbara area.
Terms of the deal were not disclosed.
Kovack's last b/d acquisition was Resource Horizons Group, a 200-advisor firm out of Marietta, Ga., in 2014.