Some new Advisor Group reps staring at reduced pay grid

Some reps and advisers who formerly worked at Ladenburg Thalmann broker-dealers are looking at potentially reduced payouts as they make the shift later this year to integration into the Advisor Group network, which in February completed its $1.3 billion acquisition of Ladenburg Thalmann Financial Services Inc.

For example, advisers must generate much more revenue at Securities America Inc. — $750,000 — to see a payout of 95% of each dollar in sales he or she generates, according to industry executives. Payout at Securities America falls to 92% of sales below that amount.

That means advisers at Securities Service Network, known as SSN and one of the broker-dealers scheduled to be merged into Securities America, will likely see a reduction in payout.

Advisers at SSN who generate $500,000 in fees and commissions, for example, would see a potential reduction of $15,000 total payout annually at Securities America, according to industry executives who were familiar with the changes, which have been discussed internally at Advisor Group this month.

Advisor Group said last month it was merging three Ladenburg Thalmann broker-dealers into the largest Ladenburg firm, Securities America. Along with SSN, the other two firms being rolled into Securities America are Investacorp and KMS.

The three broker-dealers being rolled into Securities America have about 1,200 reps and advisers. Consolidating or merging broker-dealers is typically a way for large networks like Advisor Group to lower costs, as separate back offices and employees for each firm often deliver similar services to advisers.

“There are many positive aspects for SSN advisers transitioning to Securities America,” SSN’s CEO, Wade Wilkinson, wrote in an email. “We continue to meet with our advisers to explain the enhanced business growth opportunities they will have access to, as well as the enhanced tools and platforms that come with being part of Securities America and Advisor Group.”

Some of the advisers who will now work under Securities America may also face increases in administrative fees, but those details were less clear and brokers may have more wiggle room and ability to negotiate more generous terms in the coming months, those executives said.

“Both SSN and KMS had aggressive payout grids, so many of the advisers who had production under $750,000 of [total revenues] will see a drop in payout to conform to the Securities America grid,” said Jon Henschen, a longtime industry recruiter. “These moves will position Advisor Group to cut costs dramatically by closing three back offices and raise profitability on advisers through lower payouts and higher expenses.”

“It’s important for advisers to look at bottom line compensation — there are a lot of fees and costs to consider,” said Jodie Papike, president of recruiting firm Cross-Search. “The good news is that overall compensation from Securities America is very competitive in the market. It’s also going to be very easy for the old Ladenburg advisers to move to Securities America.”

A senior adviser at one of the Advisor Group broker-dealers said that the former Ladenburg Thalmann advisers should not sweat the lower percentages or dollar amounts on annual payouts. "I can tell you that the shared services, technology, weekly commissions and more should more than offset their lower payout," said the adviser, who asked not to be named.

The combination of the Advisor Group and Ladenburg Thalmann broker-dealer networks created a giant firm with more than $450 billion in assets under management, $3 billion in annual revenues and nearly 11,500 advisers.