Cost pressures compel $24 billion B-D to sell stake to PE firm

Lincoln Investment Planning Inc., a brokerage firm with $24 billion in assets that has been family-owned since 1968, decided this year it needed to seek an outside investor to help it meet its growth plans over the next five years. As a result, Lincoln sold a 20% stake in the company to private equity firm Lovell Minnick Partners. The broker-dealer hopes the infusion of capital will help it to grow amid rising technology costs and regulatory expenses, including a pending proposal for a fiduciary rule from the Labor Department, according to Lincoln Chief Executive Ed Forst. “Growth going forward will be somewhat more expensive than growth in the past,” Mr. Forst said. “If you think about it, just with the DOL and technology, there are two [areas] that are going to be more expensive.” James E. Minnick, a managing director at Lovell Minnick, declined to say how much he paid for the 20% stake in Lincoln Investment Planning. Lovell Minnick has been a major investor in the independent wealth management space. The firm sold First Allied Holdings Inc. in 2013 to RCAP Holdings two years after its initial investment. In March, Lovell Minnick sold $6 billion registered investment adviser Mercer Global Advisors Inc. to another private equity firm. Lovell Minnick also has a stake in H.D. Vest Financial Services Inc., a firm in Irving, Texas, with more than 4,500 brokers. “We like the market, and we like the opportunity,” Mr. Minnick said. “It's a continuation of what we've been doing for several years.” Mr. Forst expects Lincoln, which he said has around 800 advisers and approximately $225 million in annual revenue, to double those totals in five years. His goal is for Lincoln to reach $450 million in revenue with around 1,400 advisers in that timeframe. Part of that growth plan will involve using the Lovell Minnick investment to make larger acquisitions than the deals that Lincoln has done in the past, Mr. Forst said. Lincoln picked up Great American Advisors Inc., a firm with around 500 advisers, in 2010, and bought a 300-adviser firm, Capital Analysts Inc., in 2012. Mr. Forst told InvestmentNews at that time that he thought broker-dealers needed at least $200 million in revenue to meet rising compliance and technology costs.