NFP’s adviser business bolstered by indie movement

Driven by migration to the independent channel, National Financial Partners’ Advisor Services Group, the smallest of the company’s three business units, grew the fastest in the second quarter ending June 30.
Its $54 million of revenue represented 23% of NFP’s total quarterly revenue but grew at what the company calls an organic rate of 16% from the previous year’s quarter. That compares with NFP’s individual client group, which produced $91.4 million, or 39% of revenue but grew at a 5.5% rate, and with the corporate client group’s $89.5 million of revenue, representing 38% of total revenue but which grew at a 3.7% organic growth rate.
“Clients continue to migrate to the independent channel,” NFP Chief Executive Jessica Bilbliowicz said in a conference call with analysts this morning, attributing the unit’s growth to stronger markets, client retention and a rise in new clients.
Assets under management at its RIA firms as of June 30 increased to $8.2 billion from $6.8 billion a year earlier, though were down from this year’s first quarter.
The advisor services unit is the least profitable of the company’s businesses. Its adjusted earnings before interest, taxes, depreciation and amortization in the quarter rose 53% to $2.3 million, which translates to a profit margin of 4.2%–up from 3.5% one year earlier. NFP said that 59% of its advisers’ revenue came from asset-based fees and 41% from commissions.
NFP’s corporate group, which sells health, retirement planning and insurance products to middle-market companies, had adjusted earnings of $15 million—unchanged from a year-earlier but with a profit margin of 16.8%.
Its individual client group, whose independent firms sell life insurance and related “wealth-transfer” products to wealthy individuals, reported earnings that fell 1.5% from a year earlier to $9 million and a profit margin that fell to 9.8% from 12.8%.
For the first six months of 2010, the advisor services group provided $4.3 million of NFP’s consolidated adjusted earnings of $53.9 million. The corporate client group represented $34.5 of adjusted earnings and the individual client group $15.1 million.
NFP, whose earnings for years were battered by poor performance at many of its constituent insurance businesses, said it is ending its program of closing down or selling back unprofitable firms. It sold six such businesses in the second quarter—though it retains an interest in one. Since the program began, it has sold 46 businesses for about $27 million in cash, stock and notes.
The company generated $37.3 million of operating cash flow in the second quarter, up from $4.9 million in the first quarter and $28.6 million one year earlier. Ms. Bibliowicz said NFP will redeploy its excess cash to recruiting, acquisitions and subacquisitions in its corporate client and investment adviser lines of business.