First Allied bulks up on advisory firm

Nov 4, 2012 @ 12:01 am

By Andrew Osterland

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Independent broker-dealer First Allied Holdings Inc. last week announced the acquisition of investment advisory firm The Legend Group from Waddell & Reed Financial Inc.

Legend specializes in retirement solutions such as 403(b) plans for public educators and employees of nonprofit organizations. It has about 450 financial advisers and $6 billion in assets under management.

The unit will continue to operate as an independent firm under the same name.

The transaction price on the deal wasn't disclosed.

Publicly traded Waddell took a charge of $42.4 million to write down the investment. Given that Waddell paid about $75 million for the firm in 2000, according to Securities and Exchange Commission filings, the price tag is likely about $33 million.

“The sale of Legend reflects our desire to emphasize our core business,” Hank Herrmann, chief executive of Waddell & Reed, said in a statement.

“We think we got good value in the deal, and if we do our jobs right, it will help both firms' advisers be more successful,” said Joel Marks, chairman of First Allied Securities Inc., a unit of First Allied Holdings.

This is the first substantial acquisition by First Allied since it was acquired by private-equity firm Lovell Minnick Partners LLC a year ago.

“With Lovell Minnick backing us, our goal is to do acquisitions that make sense,” Mr. Marks said.


The Legend Group is a somewhat unusual first foray into the acquisition market for First Allied in that it isn't a traditional broker-dealer, and the combination doesn't offer the potential for substantial cost savings.

“There are some obvious short-term synergies in terms of operating leverage and combined purchasing power, but we believe that synergies on the growth and revenue side will be much greater than on the expenses side,” Mr. Marks said.

He added that First Allied advisers will benefit from Legend's expertise in the 403(b) market and that his firm's expertise with practice management, marketing and a range of product solutions will benefit Legend advisers, as well.

“We have a process here to help advisers grow their business and become more profitable. We'll make that available to advisers at Legend,” Mr. Marks said.

Legend Group CEO Mark Spinello said that the deal will work to the benefit of his firm's advisers.

“We believe this transaction will further enhance our ability to deliver premier solutions to our advisers and their clients. Joining First Allied aligns us with a partner company that shares our independent roots and our business goals,” Mr. Spinello said in a statement.

The combined firms will have nearly 1,400 advisers and $28 billion in assets under administration.

Although private-equity investors aren't typically known for their patience, Mr. Marks said that Lovell Minnick takes a long-term view of its investment.

“They want to drive growth rather than just cut costs,” he said. “We sought them out as an investor because of that.” Twitter: @aoreport


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