Kovack Securities buys brokerage assets of Capital Guardian

Capital Guardian's $593 million RIA is not part of the sale

Sep 27, 2017 @ 2:20 pm

By Bruce Kelly

Kovack Securities Inc. said on Wednesday it had purchased the brokerage assets of Capital Guardian, a wealth management firm with 35 financial advisers that shut down its broker-dealer in July, according to its BrokerCheck report.

It was Kovack Securities' second such asset purchase in the past several months. In May, the firm said it was buying the assets of TKG Financial, a small IBD with around 10 advisers and more than $200 million in client assets.

Terms of Kovack's acquisition of the brokerage assets of Capital Guardian were not released.

Kovack Securities is a mid-sized firm based in Fort Lauderdale, Fla., that generated $65.4 million in total revenues in 2016 and is home to approximately 400 advisers. Capital Guardian is based in Miami and posted a net loss of $2.2 million in 2015, according to its most recent financial filings with the Securities and Exchange Commission.

Capital Guardian Wealth Management, an RIA with $593 million in assets according to its form ADV, was not part of the sale, according to a press release, but will use wealth management platforms offered through Kovack Securities.

In an interview Wednesday, Brian Kovack, co-founder and president of Kovack Securities, characterized the deal as a strategic partnership rather than a true acquisition, stressing that Capital Guardian did not sell its RIA or parent corporation.

The potential for such business partnerships is strong, he said. "We are seeing significant appetite from smaller firms to remain independent but operate as a branch" or (office of supervisory jurisdiction)," he said.

"They want to take advantage of what Kovack offers in technology, custody and compliance," he said. "By aligning with Kovack, smaller firms can reduce overhead and operating costs while using technology they wouldn't otherwise be able to access."

At the start of the year, industry executives and consultants said they believed increased consolidation was coming to the IBD industry. Independent brokers have seen margins compress steadily since the credit crisis, as record-low interest rates ate into their bottom lines. New regulations have hampered the sale of high commission products such as nontraded real estate investment trusts and variable annuities, further increasing the pressure on firm finances.

This year has so far seen five deals involving independent broker-dealers with $136 billion in assets changing hands, according to a report this month from Fidelity Clearing & Custody Solutions.

LPL Financial's acquisition in August of the four firms in the National Planning Holdings network is by far the largest such deal. Advisers with the NPH broker-dealers manage approximately $120 billion.


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