© 2020 Arizent. All rights reserved.

Ameriprise Buying Smaller IBD With Checkered Past

Register now

This story has been updated.

The country's second-largest independent broker-dealer has said it will buy a fast-growing firm with a checkered regulatory past and a recent series of annual losses.

The deal for the retail assets of JHS Capital Advisors is Ameriprise Financial's first acquisition of an advisory firm since 2009, when it bought H&R Block Financial Advisors.

JHS "is a natural fit in terms of both firms' shared commitment and dedication to providing outstanding service to clients," Neal Maglaque, Ameriprise's chief operating officer and head of business development within the company's advice and wealth management division, said in a statement. "We look forward to helping JHS advisors grow and serve their clients under the Ameriprise banner."

Maglaque did not initially respond to questions about JHS's regulatory history, nor its string of money-losing years. After this story was posted, however, a spokeswoman for Ameriprise sent along the following statement from Maglaque:

“We did substantial due diligence and review, and we were gratified to see extensive work had been done from a compliance and supervisory perspective to address past issues. We’re pleased with the quality of advisors at JHS and we look forward to welcoming them to Ameriprise."


JHS generated over $38 million in revenue in 2014 and at year-end had retail assets totaling $4.1 billion, according to the release -- and the firm has been growing rapidly since 2012.

However, it also racked up million-dollar losses for four straight years between 2010 and 2013, according to SEC filings. In 2010, the company lost $7 million, and in 2013, $1.34 million. Ameriprise did not immediately respond when asked for JHS's 2014 numbers.

JHS began its life as Pointe Capital, but in 2009 call center magnate John Sykes acquired the firm and renamed it with his own initials

Sykes had owned another IBD, GunnAllen, but FINRA shut it down in 2010; the company had faced lawsuits from investors seeking as much as $50 million in damages.

FINRA has also fined JHS for several infractions, many involving fees.

In June 2013, JHS paid a $75,000 fine -- without admitting or denying findings -- for allegedly making 882 transactions in 843 nondiscretionary accounts. And in 2011, the firm took a nearly $2 million hit in a FINRA case involving a former broker, Enver Rahman Alijaj, who was accused of churning his clients' accounts for commissions in 2008 and 2009.


Although Ameriprise did not disclose the terms of the deal, one industry recruiter -- who was not told the names of the firms involved -- thought such a deal suggested a low valuation.

"Everything points to: Why would somebody do this transaction? But it's all about the price," says Danny Sarch, a recruiter with Leitner Sarch.

"There's a certain percentage of broken-down cars that isn't worth fixing up," Sarch adds -- "but if you happen to be a real good fixer-upper, you are more likely to buy the broken-down house than someone else."

JHS is a relatively small acquisition for giant Ameriprise, bringing in 150 financial advisors -- roughly two-thirds of which are independent with the rest employees, says Ameriprise spokeswoman Kathleen McClung. (Between 25 and 30 support staff will be losing their jobs in the acquisition, she adds.)

Ameriprise already has 7,607 independent advisors, putting it second only to LPL Financial's 14,000-plus. It also has 2,084 employee advisors.

And JHS' $38 million would have put it at about No. 68 on Financial Planning's annual FP50 ranking of independent B-Ds; No. 2 Ameriprise had $4.8 billion in operating net revenue last year.

Absorbing the smaller firm "will not have a material impact on the company's revenues," McClung says.

Read more:

For reprint and licensing requests for this article, click here.