First Allied bulks up on advisory firm

NOV 04, 2012
Independent broker-dealer First Allied Holdings Inc. last week announced the acquisition of investment advisory firm The Legend Group from Waddell & Reed Financial Inc. Legend specializes in retirement solutions such as 403(b) plans for public educators and employees of nonprofit organizations. It has about 450 financial advisers and $6 billion in assets under management. The unit will continue to operate as an independent firm under the same name. The transaction price on the deal wasn't disclosed. Publicly traded Waddell took a charge of $42.4 million to write down the investment. Given that Waddell paid about $75 million for the firm in 2000, according to Securities and Exchange Commission filings, the price tag is likely about $33 million. “The sale of Legend reflects our desire to emphasize our core business,” Hank Herrmann, chief executive of Waddell & Reed, said in a statement. “We think we got good value in the deal, and if we do our jobs right, it will help both firms' advisers be more successful,” said Joel Marks, chairman of First Allied Securities Inc., a unit of First Allied Holdings. This is the first substantial acquisition by First Allied since it was acquired by private-equity firm Lovell Minnick Partners LLC a year ago. “With Lovell Minnick backing us, our goal is to do acquisitions that make sense,” Mr. Marks said.

UNUSUAL FORAY

The Legend Group is a somewhat unusual first foray into the acquisition market for First Allied in that it isn't a traditional broker-dealer, and the combination doesn't offer the potential for substantial cost savings. “There are some obvious short-term synergies in terms of operating leverage and combined purchasing power, but we believe that synergies on the growth and revenue side will be much greater than on the expenses side,” Mr. Marks said. He added that First Allied advisers will benefit from Legend's expertise in the 403(b) market and that his firm's expertise with practice management, marketing and a range of product solutions will benefit Legend advisers, as well. “We have a process here to help advisers grow their business and become more profitable. We'll make that available to advisers at Legend,” Mr. Marks said. Legend Group CEO Mark Spinello said that the deal will work to the benefit of his firm's advisers. “We believe this transaction will further enhance our ability to deliver premier solutions to our advisers and their clients. Joining First Allied aligns us with a partner company that shares our independent roots and our business goals,” Mr. Spinello said in a statement. The combined firms will have nearly 1,400 advisers and $28 billion in assets under administration. Although private-equity investors aren't typically known for their patience, Mr. Marks said that Lovell Minnick takes a long-term view of its investment. “They want to drive growth rather than just cut costs,” he said. “We sought them out as an investor because of that.” [email protected] Twitter: @aoreport

Latest News

Edward Jones facing more race bias claims in new lawsuit
Edward Jones facing more race bias claims in new lawsuit

A private partnership, Edward Jones is a giant in the retail brokerage industry with more than 20,000 financial advisors.

Advisor moves: LPL recruitment momentum continues with $815M Northwestern Mutual team
Advisor moves: LPL recruitment momentum continues with $815M Northwestern Mutual team

Meanwhile, Raymond James and Tritonpoint Partners separately welcomed father-son teams, including a breakaway from UBS in Missouri.

SEC chief Atkins signals caution on prediction market ETFs amid broader rethink of novel fund structures
SEC chief Atkins signals caution on prediction market ETFs amid broader rethink of novel fund structures

Paul Atkins has asked staff to solicit public comment on novel ETFs, pausing the clock on as many as 24 filings linked to the booming event contracts market.

Private capital's $1 trillion bet on the American retirement account
Private capital's $1 trillion bet on the American retirement account

From 401(k)s to retail funds, Deloitte sees private equity and credit crossing into mainstream investing on two fronts at once.

Advisor moves: Wells Fargo Advisors pulls in $9.6b in fresh talent during first half of May
Advisor moves: Wells Fargo Advisors pulls in $9.6b in fresh talent during first half of May

Big-name defections from Morgan Stanley, UBS, and Merrill Lynch headline a busy two weeks of recruiting for the wirehouse.

SPONSORED Are hedge funds the missing ingredient?

Wellington explores how multi strategy hedge funds may enhance diversification

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management