The coronavirus pandemic hasn’t thrown off Advisor Group’s timeline for folding Ladenburg Thalmann into its structure after
The Phoenix-based firm set its business continuity plan into motion — and, just as before the Feb. 14
The deliberate schedule will play out as the macroeconomic fallout from the pandemic sharply cuts earnings in the sector — by as much as 25% to 50% this year,
In addition, the private equity-backed firm parted ways with 11 Ladenburg directors and executives — including longtime CEO Dick Lampen — after the deal,
Advisor Group’s plans revolve around “not the next three-to-six months or a year or two years, but much longer,” Price says.
“Our job is to use our scale and leverage to bring the best capabilities and product sets to advisors at the right price point,” he says. “We seem to be watching our advisors do what they do best, in this kind of environment particularly....It will pass eventually. We're focused on the other side of this, after the business continuity planning that we've done for the short term.”
Management shakeup
Price’s team holds weekly meetings across the company and daily huddles on its response to the pandemic, such as remote work arrangements and other requirements under FINRA
In addition to hiring Cornick — LPL’s former head of corporate development and advisor financial solutions — Advisor Group promoted Securities America recruiter Gregg Johnson to be the network’s executive vice president of recruiting and revenue acquisition. The firm also made Advisor Group EVP Cindy Hamel its chief strategy and corporate development officer.
The acquisition also took Ladenburg private — more than 140 years after its investment banking business first
In a further move, Matthew Schlueter, Advisor Group’s former EVP of wealth management solutions, switched to president of products and platforms, with oversight of Ladenburg’s asset manager, trust company and insurance brokerage.
Price says the shakeup is intended “to create more bandwidth” and was
Employment agreements entitled Lampen, Malamed and three other officers to “golden parachutes” totaling $19.1 million, a Dec. 6
With Ladenburg marching into the IBD sector by acquiring five firms over their 15-year tenure, the business grew by a factor of 40 to nearly $1.5 billion in revenue last year from $36 million in 2006, Lampen and Malamed wrote in an
“Our transaction with Advisor Group is more than just one of the largest and most high-profile deals in the history of our industry — it is a culmination of strategy and execution by many individuals, with lessons for our broader industry,” they wrote.
Recruiting implications
The company hasn't said whether advisors got retention bonuses — they typically don’t receive them unless an acquisition obligates them to repaper client assets, which they were not required to do after the Advisor Group deal. In January, the acquiring firm
Advisor Group set the minimum investment for advisors at $75,000, according to its initial solicitation letters. Representatives for Advisor Group — which has been 75% owned by Reverence Capital Partners since it
With valuations from even mid-February now out of step in the new economic reality caused by the pandemic, it could take many years for Reverence and other PE investors to break even on their investments, according to IBD recruiter Jon Henschen. Citing
“We are anticipating a flight to quality which will start growing over the coming months,” he said in an email. “Firms that have high indebtedness to net capital ratios above 5:1 are of concern, as are firms that have little in the way of product that hedges or negatively correlates the market. How this all plays out, of course, rests on how deep and long this correction continues.”
Take the largest IBD, LPL, as an example of firms that aren’t likely to take a break from recruiting. In eight grabs from the Advisor Group network this year
“We were previously at a firm that was sold twice during our tenure,” CEO Jim Nix said in a statement. “As a publicly traded firm, [LPL] will provide our business and our clients with long-term stability in this ever-changing world.”
For his part, Price says the downgrade of Advisor Group’s credit came as “no surprise whatsoever” in light of lower revenue projections for the sector. Advisor Group has enough scale and capital to stay on track with its plans, he says. Despite its current high leverage, the firm elected not to issue as much debt as some underwriters proposed for it, he adds.
Reverence “didn't take as much debt as they were offered when they bought Advisor Group, either,” Price says. He added that Advisor Group has “more cash on our balance sheet than we've ever had” in the company’s history, though he declined to state the amount.
He conceded, however, that the Ladenburg deal is “much different” from other acquisitions that Advisor Group has made in recent years. In the past, the firm purchased small and midsized IBDs without many other distinct business units. Advisor Group had always planned to take its time in merging Ladenburg’s IBDs into its shared back-office structure over a year and a half.
During the transition, the firm aims to roll out new technology and products while ensuring “service levels remain high” and that each home-office resource ends up in the “right bucket,” Price says. In terms of the number of corporate employees to serve the more than 11,000 advisors, he says it’s too early to tell how big the headcount will be when the integration is complete.
“So much of our business is driven off volume and number of advisors,” Price says. “Until we have a run-rate with our business, it's really hard to even know what you're going to look like from an employee count. We don't measure it that way. We look at it more as, how is this going to change our trajectory as a company over the next several years.”
