In a widely anticipated move, LPL Financial Holdings Inc. said Thursday that it was buying one of its own giant branch offices, Financial Resources Group Investment Services, which houses bank brokers overseeing $40 billion in assets.
The deal has a base price of $140 million in cash, with the potential to move higher based on performance targets and earnouts.
Financial Resources Group Investment Services is based in Fort Mill, South Carolina, and has under its roof about 800 financial advisers who work at 85 local bank offices and credit unions across the country, the companies said in an announcement. The firm will continue to operate independently within LPL following the closing of the acquisition, retaining its brand and leadership team.
"This deal brings new management capabilities to banks and credit unions," Rich Steinmeier, managing director and divisional president of business development at LPL, said in an interview Thursday. "I think this is a unique transaction, but that doesn't mean we wouldn’t consider others."
As an existing LPL client, Financial Resources Group Investment Services' assets are already on LPL’s custodial platform.
Financial Resources Group had two needs: capital and a succession plan, its CEO and partner, Bruce Miller, said in the same interview.
"The time is right to buy advisers' books of business, and we need cash to buy other branches, or OSJs," Miller said. "Over the last six months, the cost of capital has been going through the roof."
With regard to succession planning, Miller said that he's a long way from stepping down, but the deal with LPL means they've got the start of a plan in place.
LPL is an acquisition machine, and in the past few years it has purchased several broker-dealers. In July, it said it was buying Boenning & Scattergood, a broker-dealer and registered investment adviser headquartered in West Conshohocken, Pennsylvania, with $5 billion in assets and 40 advisers. In 2021, LPL completed its purchase of financial advisers from Waddell & Reed Financial Inc.
In this deal, LPL is buying the firm's equity, which is different from an asset purchase: LPL picks up just the financial advisers and assets, and limits the liabilities involved with ownership.
The mergers and acquisition market has been anticipating such a deal by LPL for months. The new wrinkle is that essentially, large broker-dealers like LPL are looking to play in the red-hot mergers and acquisitions market for wealth management firms.
Last month, Cetera Financial Group said it made a minority investment in Boston-area-based CCR Wealth Management, which manages $2.5 billion and had been affiliated with Cetera and its predecessor firms since 2000.
Small broker-dealers and branches are obviously of interest to large brokerage firms right now.
“It’s smaller broker-dealers and RIAs that may be an opportunity and interesting perspective to support our overall growth agenda,” LPL CEO Dan Arnold said in April during a conference call with analysts.
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