Ladenburg Thalmann Financial Services Inc., the prospective owner of Securities America Inc., is offering bonuses to keep the firm's brokers on board and probably won't see an exodus, given the volatility of the stock market.
Ladenburg, a small investment bank that also owns independent broker-dealers Investacorp Inc. and Triad Advisors Inc., agreed to pay Securities America's parent, Ameriprise Financial Inc., $150 million for the firm. InvestmentNews.com reported on July 21 that Ladenburg was one of the most likely buyers for Securities America.
Ladenburg, a publicly traded company backed by billionaire physician Phillip Frost, could pay up to an additional $70 million if Securities America meets certain performance targets, according to the firm's filing with the Securities and Exchange Commission.
Brokers and former brokers associated with Securities America welcomed the acquisition.
FINALLY, 'FINALITY'
“The news is positive, and it's good there is some finality to this, as a lot of people were leaving. We'll review the deal to see if it makes sense for us,” said Andrew Oster, president of Oster Financial Group LLC, a member firm of Securities America.
“This is about as good a deal as the advisers could have expected,” said Donald Patrick, president of Integrated Financial Group Inc. and a former top producer at Securities America. He moved his practice to LPL Financial LLP two weeks ago.
“I imagine there won't be a lot of change for them and they can probably expect some stay bonuses,” Mr. Patrick said.
Retention packages will be discussed with brokers on an individual basis this week.
Two recruiters, Philip Flakes, managing partner at Starpoint Consulting Group LLC, and Larry Papike, president of Cross-Search, said that they expect the stay bonuses to be tiered based on individual adviser production levels.
They are expected to be competitive with some of the offers that other broker-dealers, such as LPL and Ladenburg's Investacorp subsidiary, have been floating to Securities America brokers.
The recruiters said that the reaction among brokers so far has been generally positive.
“This is tough for recruiters like me, but the deal is probably the best they could have gotten,” Mr. Papike said. “I think most of the advisers will stay put.”
The volatility of the markets also is likely to work in the firm's favor.
“The last thing that advisers want to do in a volatile time like this is move their clients to another firm,” Mr. Papike said.
After Ladenburg makes its pitch, Mr. Flakes said that he plans to circle back to 15 or 20 financial advisers with whom he has been talking.
“As long as Ladenburg Thalmann doesn't change everything they're doing, I don't think there will be much more shakeout with the advisers,” he said.
In an interview last Wednesday when the deal was announced, Ladenburg chief executive Richard Lampen and Securities America chief executive Jim Nagengast said Securities America would be run as an independent business, and that Mr. Nagengast would continue to call the shots.
“The success of our prior two acquisitions was based on their remaining independent,” Mr. Lampen said. “That is also the case here with Securities America.”
The transaction will give Ladenburg Thalmann a total of 2,700 advisers with $70 billion in assets under management and annual revenue of between $650 million and $675 million, according to Mr. Lampen. “This is a transformational acquisition for us,” he said.
For Mr. Nagengast, who has struggled to retain top producers since Ameriprise put the firm on the block in April, the deal is a job saver.
“We've achieved everything we hoped to without any disruption to our advisers and their day-to-day operations,” he said. “We've found a partner committed to the independent-broker-dealer space and committed to our advisers and employees.”
Mr. Nagengast said Ladenburg will add trust services, investment banking and asset management to the Securities America mix.
Securities America closed the book on an ugly chapter in its history earlier this month when a federal judge approved an $80 million settlement of an investor class action against the firm. The suit stemmed from the sale of private placements issued by Medical Capital Holdings Inc. and Provident Royalties LLC by dozens of Securities America brokers. Investors ultimately lost about $400 million. Ameriprise, which put the firm up for sale after the losses came to light, will cover the costs of the settlement, as it did with an earlier deal to settle individual investor claims.
For Ladenburg, the deal is an inspired piece of business, said Timothy Hurley, managing director of boutique investment bank Bentley Associates LP.
“It's basically a mass hiring and they're getting 1,700 brokers for $88,000 each. Under the circumstances, I wouldn't say that's cheap, but it's not bad.”
Add in another $50 million in retention bonuses and the deal still looks good for Ladenburg, recruiters said.
Email Andrew Osterland at [email protected]
