SagePoint Financial back on offense with Spectrum Capital purchase

Acquires Omaha, Neb.-based broker-dealer with 25 reps, advisers

Jul 8, 2011 @ 1:09 pm

By Bruce Kelly

+ Zoom

After struggling to hang on to brokers during the darkest days of the credit crisis, SagePoint Financial Inc., which is owned by American International Group Inc., is back to playing offense, today closing a purchase of the assets of Spectrum Capital Inc., a small broker-dealer in Omaha, Neb.

Spectrum produced $3.5 million in revenue last year, and 25 representatives and financial advisers are affiliated with the firm. Unlike many small independent broker-dealers that recently have gone out of business, Spectrum reps didn't sell private placements or real estate deals that resulted in investor lawsuits and costly litigation against dozens of broker-dealers, executives said.

Spectrum will operate as a “super OSJ,” or office of supervisory jurisdiction, under SagePoint, said Jeff Auld, the latter's chief executive.

“The Spectrum brand won't go away,” said Mr. Auld, who noted that Spectrum, like SagePoint, uses Pershing LLC for clearing and custody.

“There was nothing distressed about Spectrum Capital. They had no exposure to toxic products,” Mr. Auld said.

“They have a very, very conservative business. They have nine or 10 advisers in community banks, and some others used to be in community banks and are now independent.”

The acquisition of a group of advisers is a turnaround for SagePoint, which formerly was named AIG Financial Advisors Inc.

The federal government's bailout of its parent, American International Group, during the credit crisis stirred anger by consumers against the brand, and some brokers fled. In early 2009, the firm's name was changed to SagePoint, and it saw a decline in revenue that year of 38.5%.

Mr. Auld is optimistic about the future. (See the full profile for SagePoint's most recent financials, staffing and other info.)

“I hope to be talking about more deals in the future,” he said. “We are in conversations with other firms and opportunities like this.”

At the end of last year, SagePoint had 1,740 affiliated reps and advisers, a decline of 16.7% from 2009. Its gross revenue last year declined 5.9% from 2009 to $213.9 million.

SagePoint currently ranked as the 23rd largest independent broker-dealer in the most recent InvestmentNews IBD rep rankings (Click here for chart). The firm also ranked 23rd among independent B-Ds for revenue produced in 2010 (Click here for chart.)

“I think there's going to be a lot of consolidation in the industry over the near term,” and it's better to be in front of the consolidation line rather than in the back,” said Paul Hassler, Spectrum's former owner and president, who will remain with the firm.

“When you look at this business, scale is just everything,” he said. “The regulatory elements of this business are going to become more and more difficult, and the price of technology one needs to compete with big firms is a big factor, too.”

Mr. Hassler said he talked to six other firms, but two parts of SagePoint stood out: its technology and its advisory platform.

“And the culture of firm was more in line with Spectrum — that Midwest, high-touch emphasis on customer service,” he said.

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