After PE deal, Advisor Group pays advisors $50M ‘thank you’ award

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Financial advisors who stayed with Advisor Group as it changed hands twice in four years will reap the rewards of their loyalty to the tune of $50 million in awards from the firm.

“We wanted to do something for them to say thank you,” says Advisor Group CEO Jamie Price.

The independent broker-dealer network’s new majority owner, private equity firm Reverence Capital Partners, closed the acquisition of its stake in Advisor Group earlier this month. It’s the largest M&A deal of the year across wealth management in terms of Advisor Group’s $272 billion in client assets and the reported price tag of more than $2 billion.

For the network’s advisors, the deal yielded the thank-you awards, a yearlong net new asset program and, in some cases, company stock.

Funds affiliated with Lightyear Capital and Canadian pension manager PSP Investments also sold their remaining interest in the IBD network to Neuberger Berman’s private equity arm, according to Price. The parties haven’t disclosed the financial terms of the deal.

Price also declined to provide exact figures for the 7,000-advisor network’s three-part “advisor appreciation program.” He did the share that the total “thank-you award” amounted to around $50 million, saying the amount for each advisor varied by production, manager decisions and other criteria.

“What we wanted to do was really continue the momentum we've had as a company,” he says of the advisor appreciation program. “It’s a significant pool of money we put up with Reverence's concurrence.”

Price spoke with Financial Planning after winding up his seventh stop on the company’s third annual 20-city “roadshow,” in which he and other executives visit advisors across the country. Former Executive Chairwoman Valerie Brown also remains an investor and board member under Reverence.

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The asset program rewards advisors for bringing additional brokerage or advisory account holdings from new or existing clients onto the network’s platforms, including an incremental incentive if they use the eQuipt digital onboarding tool the firm launched last November.

Advisor Group will pay awards for net new asset flows from the beginning of this month to Aug. 7 of next year, according to Price. The assets must go to its platforms under clearing partners Pershing or Fidelity Clearing & Custody Solutions’ National Financial Services.

With the SEC’s Regulation Best Interest going into effect next June, the product-neutral program will help advisors and the four-firm network comply with the disclosure and supervisory requirements of the rule, Price says.

“[Reg BI is] going to come faster than people think,” he says, adding that the firm aims “to do the job that we're supposed to do as a wealth management company, and that is have [advisors’] backs on this kind of stuff.”

In another tangible expression of the IBD network’s appreciation, advisors who qualify as accredited investors gained access to company stock alongside the management team, including so-called upside warrants phasing in after a particular rate of return.

Lightyear’s affiliates sold the rest of its interest in the firm between the deal and its close.

“Working with Valerie Brown, Jamie Price and the entire management team over these last three years has led to dramatic growth and expansion at Advisor Group, results everyone can be very proud of,” Lightyear Managing Partner Mark Vassallo said in a statement.

Alexander Samuelson, a spokesman for Neuberger Berman, said in an email that the firm’s private equity affiliate invested alongside Reverence Capital, but declined to discuss the purchase price for its equity or the level of ownership.

“We strongly believe in the growth opportunity in the wealth management industry and are excited to be backing an industry leader,” Reverence co-founder Milton Berlinski said in a statement. “We are investing in a strong and experienced management team, and we look forward to building a successful partnership that benefits all parties.”

Royal Alliance Associates, SagePoint Financial, Woodbury Financial Services and FSC Securities reached their current footprint from around 5,200 advisors and $157 billion in client assets when the Lightyear funds and PSP purchased the stake from insurer AIG in May 2016.

Since last year, Woodbury and Royal Alliance have absorbed advisors from Signator Investors, Questar Capital and Capital One Investing under other acquisitions that fueled the growth. Some 2,500 advisors joining the two Advisor Group IBDs received retention bonuses.

The thank-you awards to advisors who stayed the course throughout the flurry of deals are also taking the form of cash payments or multiyear loans. Price notes that for all the deals the network has made, it also passed on more than 20 acquisitions in the past three years.

Going forward, he says, the firm will listen to M&A deals as “sub-scale” firms seek out buyers, but acquisitions are never the firm’s primary strategy when it creates and revises its five-year plan each year.

Price has also grown accustomed to answering concerns about PE firms’ investments but “for the advisors that have been here since the AIG lift-out, we don’t get that question at all anymore,” he says. “It's really about helping advisors grow.”

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Independent BDs M&A Private equity firms Private equity fundraising Jamie Price Advisor Group Lightyear Capital