Securities America buying insurance-based B-D

Sunset Financial Services has 268 affiliated reps and $2.4 billion in client assets

Jul 21, 2014 @ 2:01 pm

By Bruce Kelly

Securities America, mergers and acquisitions, broker-dealers
+ Zoom

Securities America Inc. said Monday it had reached an agreement to acquire certain assets of Sunset Financial Services Inc., a broker-dealer owned by Kansas City Life Insurance Co.

Sunset Financial is a mid-sized firm with 268 affiliated registered reps and $2.4 billion in client assets, according to a statement by the companies. The Sunset Financial reps are low producers, with an average production of a little more than $67,000.

Under the agreement, Sunset Financial Services will cease retail operations and transfer its broker-dealer and registered investment advisory accounts to Securities America. Terms of the asset sale were not released.

This is the second deal Securities America, a subsidiary of Ladenburg Thalmann Financial Services Inc., has announced this month. Two weeks ago, the firm said it was it was acquiring the assets of Dalton Strategic Investment Services Inc., a small firm with 60 representatives and advisers.

Sunset Financial had total revenues of almost $18 million last year and posted a net loss of $454,000, according to its most recent annual audited financial statement with the Securities and Exchange Commission.

The sales force of Sunset Financial consists primarily of insurance agents of Kansas City Life, according to the SEC filing. The firm's revenue is primarily generated from the sale of variable life and annuity proprietary and non-proprietary products, as well as other fee-based products, according to the SEC filing.

Sunset Financial is facing three arbitration claims stemming from real estate offerings: two from private placements and one for a real estate investment trust that also involved oil and gas investments, according to the SEC filing. The company did not reveal the potential damages of those investor claims in the filing.

Because this was an asset purchase, the seller is responsible for those claims, wrote Securities America spokeswoman Janine Wertheim in an email.

Several insurance companies, including giants such as MetLife and ING, have sold broker-dealers since the credit crisis. Record low interest rates have cut into sales of variable annuities, a lucrative product for insurance company owned broker-dealers.

“Like other similar broker-dealers, Sunset Financial Services' attempts to achieve growth have been challenged by increasing costs associated with compliance and technology,” said Walter E. Bixby, Kansas City Life's vice chairman of the board, in a statement.

Following the transaction, Sunset Financial Services will focus on its core responsibility of issuing, developing and marketing variable insurance products for Kansas City Life, the insurer said.

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