Cetera Holdings announced plans earlier this week to acquire Avantax, the $84 billion tax-focused wealth management firm, in a take-private, all-cash deal for $1.2 billion. Cetera has said Avantax will operate as a standalone business unit within the Cetera ecosystem, and that the company has no intention of changing the business model. And according to an FAQ distributed to Avantax reps, Cetera doesn’t expect the transaction to have a material impact on clients.
But a number of Avantax advisors, who have already gone through multiple broker/dealer ownership changes over the last several years, are not so sure. According to a flash poll completed by some 62 Avantax advisors conducted by WealthManagement.com this week, half said the acquisition makes them more likely to consider changing firms. Thirty-seven percent of advisors said it has no impact on their inclination to change firms, while nearly 13% said they’re less likely to consider moving under the new ownership.
To be sure, a flash poll lacks precision, and advisors are often wary when the platforms they affiliate with announce an ownership change, regardless of the stability and resources a new owner like Cetera can bring.
Yet it gives some indication of attitudes among Avantax advisors, many of whom have gone through a number of ownership changes in recent years, and most recently saw executives engage in contentious proxy fights against activist shareholders. The poll was emailed to over 1,200 Avantax advisors over the course of two days.
Luke Funk, an advisor with Luke Funk Wealth Management in Fort Wayne, Ind., said he started looking around at other broker/dealers several months ago, when he got an indication that the Avantax board would be selling the business. Since 2001, Funk was affiliated with 1st Global, a tax-focused independent broker/dealer that Blucora (now Avantax) acquired in 2019.
“If I’m going to get sold again and have to go through all this again, I’m going to go jump in the biggest pond I can find,” said Funk, who said he is in talks with Commonwealth and LPL Financial. “I want to be with the broker/dealer who’s buying firms, not the broker/dealer who’s trying to pump up my assets and tell me I got to go get more assets and more assets, and then they just turn around and sell me.”
A spokesman for Cetera declined to comment for this article.
Cetera, with more than 8,000 affiliated advisors overseeing $341 billion in assets under administration, is among the largest independent broker/dealers, and since 2019 has acquired assets from Foresters Financial, Voya Financial Advisors and Securian Financial Group.
Funk is also frustrated he has to explain the ownership change to clients.
“That’s my frustration with it all. You guys are selling me, and now I’ve got to go do all this work. I’m not a shareholder, so there’s no advantage for me,” Funk said. “We just want stability. We haven’t had it since 1st Global sold.”
Avantax said its advisors will not be required to change clearing and custody platforms, so there will be no new paperwork for clients to sign.
About 48% of advisors who answered the flash poll were neutral on how they expect the acquisition to impact their business. Nearly 31% anticipate a negative impact, while nearly 21% expect a positive impact on their business.
“I heard no substantive discussion, much less assurances, that change would not be in the offing subsequent to closing of the sale,” wrote one Avantax advisor, who declined to be named. "It is implausible to think that there would not be some significant level of change when a 3,000 person (advisor) organization is subsumed by an 8,000 person organization. Unfortunately, change has been a constant for the Avantax and the predecessor companies for the past seven years or more.”
Blucora made its first foray into the retail wealth management business in 2015, when it purchased tax-centric broker/dealer HD Vest Financial Services from an investor group led by Parthenon Capital Partners and included Lovell Minnick Partners and Fisher Lynch. Prior to that, it was owned by Wells Fargo.
Dianne Corsbie, an advisor with Boncor Financial Group, has been with HD Vest since the early 1990s, and said the journey through all of the acquisitions has been positive.
“All acquisitions have short term issues but eventually we all learn to accept these changes,” Corsbie said. “Each change has given us advanced technology, which is expensive for any individual small company; they are the economies of scale gained from acquisition. Our goal has never changed. As financial advisors, we are here to guide our clients into a successful retirement. Advanced markets, technology and economies of scale assist us in offering our clients the greatest advice to accomplish their goals.”
“I currently have a ‘wait and see’ attitude,” wrote one advisor, who declined to be named. “I know many reps with Cetera and think of them in a positive light. I am somewhat concerned about losing the small-firm, hands-on, family-feel that we have had, but time will tell.”
The combined Cetera is expected to have more than 12,000 advisors, if retention goes as planned. Some 45% of poll respondents said they felt negatively about being part a much larger organization, while nearly 36% were neutral on the subject and 19% felt positive about it.
“This seems to be a coup for Cetera,” wrote another advisor. “I do not see how it benefits Avantax or Avantax professional advisors. Bigger is not always better for everyone involved.”
Cetera has not said anything publicly about retention packages, but nearly 61% of respondents said they expect some kind of retention bonus or incentive package upon the sale.
Avantax and its predecessor Blucora has dealt with a number of proxy battles over the last several years. In 2021, Ancora, an RIA acquired by Focus Financial Partners, waged a proxy battle against Blucora, arguing that the management team was failing to find promised synergies between its broker/dealer business and Blucora's legacy professional tax software business, depressing the stock price. But shareholders ultimately voted to retain existing board members.
Last November, Blucora announced it was shedding the TaxAct business and rebranding as Avantax, a pure-play wealth management firm.
“I’m a CPA, and they were trying to shove their tax software on me,” Funk said. “Nobody liked it; it was junk tax software. And they finally unloaded it.”
In June, Activist investor Engine Capital, which owns about 2% of Avantax shares, sent a letter to the board of directors, urging them to consider selling the entire company. The letter outlined 10 arguments for selling the business, including the firm’s holding company structure, which it contends is creating unnecessary duplications across the organization; as well as its deteriorating competitive positioning; and the fact that its recent business momentum, such as improvements in recruitment and advisor experience, would make a sale more timely.