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For First Allied FAs, Spin Out from Advanced Equities Is a Positive

Adam Antoniades, president of First Allied, said Advanced Equities has its roots in venture capital and private equity deals, and the parent was hoping to grow that business through the independent channel when it purchased First Allied.

Independent broker/dealer First Allied Securities is spinning off from its parent Advanced Equities to focus more on its core business—helping its 1,000 advisors grow their practices. In an interview with Registered Rep., Adam Antoniades, president of First Allied, said Advanced Equities has its roots in venture capital and private equity deals, and the parent was hoping to grow that business through the independent channel when it purchased First Allied. “We wanted to make sure over the next 10 years there’s a singular focus on our business,” he said.

The management team at First Allied, including Antoniades, are buying back the firm, with the help of Lovell Minnick Partners, a private equity firm that focuses on investments in the financial services industry. The terms of the deal were not disclosed, but Antoniades said Lovell Minnick will be the majority owner of the firm. An industry source familiar with the deal said First Allied senior management will have a minority stake in the firm. First Allied reps will continue to be able to sell private equity deals by Advanced Equities, which has been a conversation point for the FAs with wealthy clients.

In addition, Lovell Minnick will commit “serious” capital towards the growth of First Allied, which will be investing in recruiting, advertising and back-office improvements, said a source who asked that his name not be used.

Private Equity Not a Focus

While the private equity side of Advanced Equities was a way for First Allied reps to get their foot in the door with wealthy clients, the reality was, not many of their FAs used these products. In fact, Antoniades said only about 5 percent of the FAs use these private equity products consistently, and they only accounted for less than 1 percent of total GDC.

Mike Robertson, CEO of Robertson Wealth Management, an affiliate of First Allied, said this was not the focus of most of the b/d’s advisors or clients. Advanced Equities was hoping First Allied would be a distribution arm for the P/E deals, but the firm’s FAs realized there were too many risks associated with selling illiquid investments, Robertson said. Such investments have a higher failure rate, he said, and this risk profile didn’t match up with that of First Allied.

“I just don’t think it was a marriage made in heaven,” Robertson said.

Jodie Papike, executive vice president at Cross-Search, said First Allied had been wanting to separate from Advanced Equities for a while because of some negative press surrounding the Advanced Equities name, and this was negatively affecting advisors.

“Pulling itself from Advanced Equities which has its roots in selling VC investments is likely a good move towards independence and multi-faceted growth for First Allied, especially since they retained a product distribution agreement with Advanced Equities,” said Chip Roame, managing partner of Tiburon Strategic Advisors in Tiburon, Calif.

More Control

First Allied also wanted to align itself with an owner that was more involved in the financial services industry, and Lovell Minnick does have that same focus, Papike said.

Because Advanced Equities and First Allied had differing strategies, the IBD probably wasn’t getting the attention it wanted, said Scott Collins, founder and CEO of FirstPoint Partners, a boutique consulting and recruiting firm, who previously worked at LPL Financial. He said the situation with Lovell Minnick purchasing First Allied is similar to when LPL was sold to two private equity firms, Hellman & Friedman and Texas Pacific Group, in late 2005. In that situation, LPL was able to grow, achieve scale and pass the benefits onto its advisors in the form of technology, higher payout and reduced ticket charges. With Lovell Minnick investing in the firm, First Allied can focus more on its core competencies and have more control and autonomy.

The industry source said the move will help First Allied build out its accredited investors business, something that has differentiated the IBD in the marketplace. The firm offers training towards certified wealth management designations, practice management tools to help the reps build out this business, and investment products geared toward accredited investors. The firm also has its “NextGen University,” a three-day conference aimed at training and educating FAs in generating leads, setting up seminars and providing wealth management resources. Advanced Equities, he said, has not committed as much financing toward these efforts as First Allied had hoped.

Robertson said the move will allow First Allied to focus more on its higher class of advisors through its advanced training, such as “NextGen.”

“They’re trying to not only hire a better quality advisor, but they’re trying to arm each of their advisors with as much information as possible,” to prepare for attracting high-net-worth clients, Robertson said.

First Allied is known for helping advisors grow their practices through these different programs, said Papike. In fact, the firm’s average production per full-time FA is $330,000, one of the highest in the IBD space, Antoniades said.

“A Non-Event”

The spinoff is likely “a non-event” for the firm’s reps, as little will change for them, the anonymous source said. They won’t have to re-paper any clients, and the firm’s management will stay intact. If anything, the change will be more beneficial for them over the long term, as Lovell Minnick invests more in the firm.

Three First Allied advisors, including Robertson, said the change was a positive from their perspective. “I’m all for it,” Robertson said.

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