Ladenburg, Blucora IBDs reach record advisory AUM

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Two major independent broker-dealers reached record assets under management in the first quarter. However, higher compensation for advisors cut into their bottom lines.

AUM at Ladenburg Thalmann — which includes Securities America, Triad Advisors and three other IBDs in its network — jumped by 10% year-over-year to $81.1 billion, the Miami-based firm said on May 9. The IBD network’s headcount also rose 13% to more than 4,400 advisors.

Blucora’s wealth management unit has roughly the same amount, accounting for the 820 advisors from the incoming IBD acquisition 1st Global at the end of the first quarter, the Irving, Texas-based firm said May 8. The $180-million transaction closed two days earlier.

Another tax-focused IBD owned by Blucora, HD Vest Financial Services, boosted its AUM by 10% above the year-ago period to a record $14 billion. The RIA assets at Blucora’s wealth management unit expanded to $24 billion following the transaction, CEO John Clendening noted.

“It’s been terrific to meet with dozens of 1st Global advisors in the past few weeks and I’m excited they are now part of the Blucora family,” Clendening said in prepared remarks.

“The days of the advisor disclosure that tells the client to ‘consult your tax advisor’ are gone,” he continued, “and a new age of wealth management which capitalizes on the combination of tax professionals, financial advisors and value-creating technologies is here.”

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A higher headcount “as a result of business expansion” at Ladenburg also pushed up compensation expenses in its IBD segment by $3.2 million, according to the firm’s quarterly SEC filing. Fourth-quarter equity volatility cut its advisory revenue by $165,000.

The Ladenburg IBD network’s income still soared by 34% year-over-year to $14.3 million on $283 million in revenue. Its parent firm achieved record net income of $34 million in 2018 on record revenue of $1.4 billion, CEO Richard Lampen noted in the firm’s annual letter to shareholders on May 2.

In contrast, higher advisor pay such as bonuses — as well as expenses from HD Vest’s conversion to Fidelity Clearing & Custody Solutions’ National Financial Services last year — caused the Blucora wealth management segment’s income to drop by 12% year-over-year to $11.5 million.

Migration of clients’ mutual funds to lower-cost share classes also cut into HD Vest’s revenue, but Clendening described its profit as “above the high end” of its target. The firm also uses some “appropriate conservatism” in its models about retention of 1st Global advisors, he said.

While the firm hasn’t yet disclosed the exact number of 1st Global advisors it added, CFO Davinder Athwal predicted the acquisition would boost wealth management income by between $1 million and $1.5 million in only the portion of the second quarter after the close of the deal.

Clendening and other Blucora officials are also learning about “some of the offerings that they have that I think are going to be a net positive on the HD Vest side as well,” he said in response to an analyst’s question,” according to a transcript by Seeking Alpha.

In his annual note to Ladenburg shareholders, Lampen described the IBD network’s client base of investors with $100,000 to $2 million in net investible assets as “underserved,” citing third-party studies finding such households have $17 trillion in combined assets.

Moving forward, Ladenburg aims to “significantly accelerate our growth on an organic basis” by “identifying opportunities to enhance the financial advisor service experience,” as well as through bulked-up recruiting and retention, Lampen said.

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Independent BDs Earnings RIAs M&A Richard Lampen John Clendening Blucora Avantax Wealth Management Ladenburg Thalmann Financial Services Securities America