Avantax focuses on bigger advisers as head count continues to drop

Blucora Inc. Wednesday reported an 9.4% decline for 2021 in the number of financial advisers registered with Avantax, its broker-dealer and registered investment adviser business, which focuses on tax professionals and accountants.

But executives said in a conference call with analysts Wednesday that Avantax was seeing the benefits of its strategic focus on more productive advisers and veterans, or those who control more assets under management.

To that end, Avantax reported 2½ times more recruited assets in 2021, at $929 million, compared to $363 million in 2020. Avantax is making this shift in a highly competitive recruiting and hiring market for experienced financial advisers and brokers who run profitable practices.

For example, in September, LPL Financial said that First Legacy Wealth Management, a three-adviser team managing $400 million, switched its broker-dealer affiliation and corporate registered investment adviser platform from Avantax Investment Services to LPL.

Meanwhile, Avantax reported 3,416 advisers or "financial professionals," as the firm calls them, at the end of 2021, compared to 3,770 at the end of 2020, for a year-over-year drop in head count of 354 advisers. Compared to the end of September, when Avantax reported 3,529 advisers, the decline in number of advisers was 113, or 3.2%.

"Over the last 24 months, a key strategic imperative has been to shift our business development focus to attract more established financial professionals with higher expected long-term retention," Marc Mehlman, chief financial officer, said during the conference call.

"This has been a success," he said, noting that the $929 million total of newly recruited assets in 2021 was more than twice the average of $407 million for the years 2017 through 2019.

"Our expectation for 2022 is for meaningful growth over 2021," Mehlman said. "This focus on fewer but more productive financial professionals has greatly increased recruitment of assets."

Avantax ended 2021 with $89.1 billion in brokerage and advisory assets, compared to $83 billion a year earlier, an increase of 7.3%.

The S&P 500 repeatedly hit record highs throughout 2021 and ultimately posted a total annual return, including dividends, of 28.7% — almost twice its median annual return of 15.4%.

Thursday, Avantax announced that it had acquired Gene Bell & Associates of Bellingham, Washington, which had previously been registered with Avantax. It didn't list the firm's assets in the press release and a spokesperson said the firm had no other comment.

Avantax has two sides to its business: its broker-dealer, Avantax Investment Services Inc., and its RIA, Avantax Planning Partners.

In December, the Securities and Exchange Commission said it had reached an agreement with 1st Global Advisors Inc., now known as Avantax Advisory Services Inc., to pay a $16.9 million penalty for failing to reveal conflicts stemming from marketing fees paid by clients for mutual funds that charge what is commonly referred to in the industry as 12b-1 fees.