No bonuses to advisers in Ladenburg Thalmann, Advisor Group deal

But they will see extras in services, including trusts and insurance marketing, management says

Nov 12, 2019 @ 2:00 pm

By Bruce Kelly

The 4,400 financial advisers working for Ladenburg Thalmann Financial Services Inc., soon to be bought by the Advisor Group, are not likely to see retention bonuses in their immediate future,.

Advisor Group said Monday night that it was buying Ladenburg Thalmann for $1.3 billion in cash, or $3.50 per share of Ladenburg's common stock.

The pitch from senior management from both firms to those advisers, as well as to the 6,500 in the Advisor Group network, is that the new, behemoth brokerage network will offer them new and varied shared services that will eventually enhance their practices.

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When brokerage firms are bought, advisers often are paid special bonuses so they will stay at the firms during the transition phase while clients arer being brought over to the new firm.

But because both Advisor Group and Ladenburg use Pershing and Fidelity's National Financial as clearing firms, advisers won't be bogged down with re-papering client accounts when the transaction closes next year, said Jamie Price, CEO of Advisor Group, during an interview Tuesday morning.

"At this point, we don't anticipate the need for a bonus," said Mr. Price. "It's difficult to see what need there is for it."

The combination of the two broker-dealer networks would create a giant firm with more than $450 billion in assets under management, $3 billion in annual revenues and nearly 11,500 advisers. Ladenburg Thalmann has five brokers dealers and Advisor Group has four.

Mr. Price stressed the commonalities between Advisor Group and Ladenburg Thalmann, particularly the variety of broker-dealers, custodians and clearing firms each maintain or use. Plus, Ladenburg Thalmann has a number of businesses — investment banking, trust services and insurance marketing — that will add to and expand Advisor Group's platform, he said.

Since Advisor Group and Ladenburg Thalmann are already committed to having a variety of custodians and broker-dealer brands, combining the two "is a less daunting task" than perhaps perceived, he added.

Industry observers had questions about the transaction, particularly the role of Reverence Capital Partners, a private equity manager which purchased a majority stake in Advisor Group earlier this year.

Ladenburg Thalmann has "consistently kept its promise of keeping the broker-dealers separate and distinct and have infused capital when needed for technology and services," said Jodie Papike, president of Cross-Search, a recruiting firm. "We hope the new owner, Reverence Capital, will do the same."

"I didn't think they would pay the advisers a bonus," said Jon Henschen, president of Henschen & Associates, a recruiting firm. "That's been the trend for private equity buyers of broker-dealers, not to pay retention bonuses. The best the reps can hope for is as little paperwork and disruption as possible."

"This gives Advisor Group a lot of scale," he said. "Does that speed up the timeline for Reverence Capital to sell the network?"

Ladenburg Thalmann first began building its network of independent broker-dealers in 2007 when it bought Investacorp Inc. Since then, it has bought Triad Advisors Inc., Securities America, Securities Service Network Inc. and KMS Financial Services Inc.

Those firms had close to 4,400 advisers at the end of last year and reported $1.4 billion in total revenue at the end of 2018, according to InvestmentNews data.

Advisor Group's four broker-dealers are: FSC Securities Corp., Royal Alliance Associates Inc., SagePoint Financial Inc. and Woodbury Financial. According to InvestmentNews data, the four combined to produce $1.7 billion in total revenue last year. They house some 6,500 producing financial advisers and registered reps.

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