Foothill Securities Inc., an adviser-owned independent broker-dealer with 220 registered reps under its roof, is in “serious discussions” to be acquired by a larger firm, according to its chairman, John Burroughs.
Four firms currently in discussion with Foothill include:
LPL Financial, Cambridge Investment Research Inc., Securities America Inc. and SagePoint Financial Inc., Mr. Burroughs said.
The discussion of merging Foothill Securities with another firm comes at a time of when the common wisdom in the securities industry is that small- and mid-sized broker-dealers such as Foothill are facing extinction-like pressures.
The number of broker-dealers has steadily decreased since the credit crisis, and the new Department of Labor fiduciary standard for retirement accounts is another layer of compliance and expense for firms to grapple with.
Sales of high-commission products like variable annuities and nontraded real estate investment trusts are down across the board, and independent broker-dealers commonly operate on notoriously thin, single digit margins.
Mr. Burroughs said that Foothill had been in discussion to sell the firm in the last few years but the discussions at the moment are more intense. The merger talks were revealed to the firm's advisers at its annual meeting a few weeks ago, he said. “If a decisions is made, it will be made shortly.”
Foothill's advisers bought the firm in 1995, when they became active board members, according to the firm's website.
A goal is to operate Foothill in the future as a branch – or office of supervisory jurisdiction – at another firm, essentially getting rid of the broker-dealer, Mr. Burroughs said. “It's not a lot of fun to be a broker-dealer these days,” he said.
Foothill Securities in 2015 generated $39.8 million in total revenue and posted a loss of $674,000, according to its annual audited financial statement filed with the Securities and Exchange Commission.
A spokeswoman for Cambridge, Cindy Schaus, said the firm declined to comment, as did Janet Reinhardt, a spokeswoman for Lightyear Capital, the new owner of SagePoint. A spokeswoman for LPL, Lauren Hoyt-Williams, also declined to comment. Securities America spokeswoman Janine Wertheim did not return calls.
This year already has seen
a steady pace of independent broker-dealer mergers and acquisitions. In January, American International Group Inc. said it was selling
AIG Advisor Group to private-equity firm Lightyear Capital and Canadian pension manager PSP Investments. At the end of February,
MetLife Inc. said it was selling its U.S. adviser unit to Massachusetts Mutual Life Insurance Co.
NFP Corp., a leading insurance broker and consultant, said last month it was selling a majority stake in its independent broker-dealer, NFP Advisor Services, to funds managed by private-equity shop Stone Point Capital. NFP Advisor Services is changing its name to Kestra Financial. And National Holdings Corp. said at the end of April that it had reached an agreement to be acquired by Fortress Biotech Inc., a biopharmaceutical company that develops novel pharmaceutical and biotechnology products.
National Holdings, with the ticker NHLD, is the parent of two independent broker-dealers, National Securities Corp. and vFinance Investments Inc.
