Yet again, insurance company cuts ties to independent broker-dealer

Vice chairman of Sammons Securities buys remaining stake from Midland National.
APR 28, 2014
Yet another insurance company has decided to ditch the independent-contractor broker-dealer business, citing as a factor pressures from regulators when a firm sells proprietary products. Steven Palmitier, chief executive of Sammons Securities Co., on Monday told the firm's registered representatives and financial advisers that vice chairman and minority owner Jerome Rydell is buying the controlling interest in the firm from the large insurance company Midland National. Mr. Palmitier made the announcement in Las Vegas at the firm's annual conference. Terms of the deal weren't disclosed. (More: Independent broker-dealer M&A market is heating up) Mr. Rydell previously owned one-third of the firm, while Midland National controlled the remainder. A midsize firm, Sammons Securities had 415 registered reps who produced $40.6 million in gross revenue in 2012, the most recent year for which information is available. It will change its name to 300 Parkland Financial. “This is only an ownership change. The firm will be managed and operated as before with the same B-D operations staff in Ann Arbor [Mich.] that you know and trust,” the firm said in an FAQ handed out to its reps and advisers on Monday. “We anticipate a two- to six-month process to complete the ownership transition process. Our goal is to minimize the impact to you and your business,” the firm said. Afraid of the expense and risk associated with the securities industry, a number of insurance companies have jettisoned independent broker-dealers over the past few years. Slumping variable annuity sales also have soured insurance companies on owning distribution networks such as IBDs. MetLIfe Inc., which previously owned four broker-dealers, and Symetra Financial Corp. both sold firms last year, with MetLife hanging onto two firms. In 2012, The Hartford Financial Services Group Inc. sold its independent broker-dealer. And in 2011, both Genworth Financial Inc. and Western & Southern Financial Group exited the independent broker-dealer business. “We want to focus on the core business -- life insurance and annuities,” said Victoria Fimea, general counsel at Sammons Financial Group, the holding company that controlled Sammons Securities. “There is less incentive to own a broker-dealer because of the regulatory pressure when it comes to proprietary product” and using the broker-dealer as a conduit for that product, she said. Mr. Rydell, who wasn't available to comment Wednesday, owns another independent broker-dealer, Sigma Financial Corp. In 2012, that firm had 607 registered reps who produced $80.1 million in revenue.

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