Insurance broker and consultant NFP is joining a cohort of insurance giants who are exiting the independent broker dealer business ahead of the Department of Labor fiduciary ruling.
NFP is selling their advisor-services arm, NFP Advisors Services to private equity firm Stone Point Capital, the company announced. Under the arrangement, NFP Advisors Services will be rebranded Kestra Financial. Headquartered in Austin, Texas, Kestra has more than 1,700 affiliated independent advisors operating under its brand.
Stone Point will acquire majority ownership of Kestra while NFP's parent company will maintain a minority stake, according to the company's press release. Terms of the transaction were not disclosed. James Poer, NFP Advisors Services' president and CEO, however, will retain his roles at Kestra.
"This agreement creates an optimal structure for NFP and Kestra, and enables NFP to focus on its core insurance brokerage and consulting competencies while promoting continued alignment between the two companies," Douglas Hammond, NFP's chairman and CEO, said in a statement.
Stone Point and Kestra share a common strategy of growing the business by expanding its presence across the country, according to a statement from Chuck Davis, CEO of the private equity firm.
The new DoL fiduciary rule has pressured many major insurance companies to reduce their footprint in the financial advice industry. However, Poer insist that the transaction has nothing to do with the fiduciary rule.
“It [the transaction] is a direct result of the tremendous growth experienced by both NFP and Kestra Financial throughout the last several years,” Poer says. “We collectively sought to optimize the capital structure of each entity as we moved into the next phase of both businesses.”
Industry observers , however, believe the sale was not unrelated to the impending new fiduciary rule.
"Absolutely the DoL rule was a central focus point for the strategic dumping of NFP's IBD," says Industry consultant Tim Welsh, president of Larkspur, Calif.-based Nexus Strategy. "When the industry leader, LPL, cuts prices and creates new products specifically for the post-DOL world, all IBDs take notice and know that they will have to follow suit."
Early this January, AIG announced that it will be selling AIG Advisor Group to Lightyear Capital, a private equity firm, attributing the fiduciary rule as one of the reasons behind this sale. MetLife followed suit in late February by selling its U.S. advisor unit to Massachusetts Mutual Life Insurance.
A number of insurance business executives believe the DoL fiduciary ruling will increase red tape and make the business unprofitable for advisors servicing clients with smaller accounts.
This story has been updated on April 7.
- Fiduciary Rule to Be Announced Wednesday, Sources Confirm
- Hungry for More: How Private Equity Firms are Snapping up RIAs
- Lightyear Agrees It Won't Poach Cetera Execs