A couple of years ago, Waddell & Reed Financial Advisors looked to be in disarray.
Thomas Butch, the longtime head of the broker-dealer, left at the end of 2017. The firm parted ways with hundreds of low-producing brokers and advisers, while some large teams left in the summer of 2018 for competitors.
The firm near the end of 2018 even cut a special perk to its close to 1,300 advisers and reps; it said it would no longer lease office space for most of its independent contractor brokers and advisers, requiring them to find and relocate to their own offices by the end of 2020.
Taking away freebies from advisers is like denying children dessert: It's best not done if the goal is to keep harmony in the household.
The firm, the broker-dealer arm of Waddell & Reed Financial Inc., which also owns the Ivy Funds, is in the throes of change. And that's not easy.
Waddell & Reed has been overhauling its business for some time. Until several years ago, the broker-dealer’s business model relied primarily on its brokers and advisers selling the parent company’s proprietary, actively managed mutual funds.
And in the middle of October, Waddell & Reed Financial's stock price spiked to a recent high of $18.02 per share with the market speculating it was bound to be the next manager of actively managed mutual funds to be snapped up, just as Morgan Stanley did at the start of the month when it said it was buying Eaton Vance.
"The last few years have been really about kind of putting us in this position, and we've made a lot of improvements internally."
Philip Sanders, CEO, Waddell & Reed Financial Advisors Inc.
That's a lot for a management team to work through. But on a conference call Tuesday with analysts to discuss third-quarter earnings, management stressed the growth of its wealth management franchise.
The firm has recruited 32 advisers this year with $1.9 billion in assets at their prior firms and added 11 more in the three months that ended in September. That's impressive, as recruiting at big firms has been hampered by COVID-19 and the general slowdown of business across the economy.
And Waddell & Reed has built up its pipeline of advisers, according to Shawn Mihal, senior vice president, wealth management. The firm has signed or made offers to 17 more advisers who generate $8.2 million in annual commissions, Mihal said during the call.
"We are seeing as the ability to bring advisers over from a variety of different types of firms," Mihal said. "So, still in the independent [broker-dealer] space, we're seeing opportunity there and the advisers that have joined this year, a considerable number come from independent, a few from wirehouse and a few from bank channels."
"The larger majority really coming through the other independent channels making a transition over to Waddell & Reed," he added.
In an indication that turnabout is fair play in the current wealth management market, Waddell & Reed could go on the offensive and jump into the market to buy other wealth management businesses, said CEO Philip Sanders.
When asked about the firm's take on current opportunities to make a deal, Sanders pointed to the difficulties of the recent past and responded that the time might be right.
"The last few years have been really about kind of putting us in this position, and we've made a lot of improvements internally ... especially on the wealth management side," Sanders said. "So, a few years ago, if we had opportunities presented to us, I think it would have been difficult for us to execute, but we're now positioned to execute on those types of opportunities."
In an email, Mihal added: "We’re pleased that our strategic steps toward stronger growth across our wealth management business are showing results, including our focus on retaining and recruiting experienced and productive affiliated advisers."
A spokesperson wrote that the company was "aware of recent rumors and the speculation that has precipitated as a result," but, as policy, Waddell & Reed Financial does not comment on market rumors or speculation.
Waddell & Reed shares closed at $15.50 on Wednesday, down 14% from its 52-week high on Oct. 16. Is this an indication that takeover speculation has cooled, or is the firm's declining share price in line with big market swings over concerns about an economic recovery and the coronavirus?
By adding and recruiting advisers, Waddell & Reed is showing it's serious about the growth of its wealth management franchise. That's a far cry from literally pulling the rug from under advisers and telling them the firm would no longer pay rent for their offices.
A $141M judgment and a federal asset freeze collide over one shrinking pool
The firm's CFO and EVP of Wealth Management Solutions are the latest executives to exit the broker-dealer.
Clients are saying they would consider switching advisors if another professional offered estate planning services, according to a new Trust & Will survey.
CEO Laurel Taylor says the fintech's composable AI stack helps workers optimize dollars across Trump Accounts, 529s, 401(k)s, and other employee benefits.
The bank has swiped three private banking veterans from BNY as the city climbs the ranks of America's fastest-growing wealth hubs.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
