Do wirehouses hold the key to Advisor Group's future?
Advisor Group's future appears to be running through the wirehouses.
Jamie Price, who headed Wealth Management Advisor Group Americas at UBS, has been named chief executive officer and a member of the board of directors, reporting to Valerie Brown, the company's executive chairman.
One of the nation’s largest independent broker-dealers, Advisor Group has been looking for a CEO since August, when Erica McGinnis was asked to step away from the post, three months after private equity firm Lightyear Capital bought the IBD, with backing from the Canadian pension investment manager PSP Investments. Advisor Group has approximately $160 billion in client assets.
Price's hire "signals a new direction in Advisor Group’s recruitment strategy," says Louis Diamond, vice president of the New Jersey-based recruiting firm Diamond Consultants. "By bringing on a seasoned UBS executive, it seems as if they will begin targeting breakaway wirehouse advisers more aggressively."
Traditionally Advisor Group's broker-dealers, including FSC Securities, Royal Alliance Associates, SagePoint Financial, and Woodbury Financial Services, have recruited advisers from other IBDs.
NEW PLAY FOR WIREHOUSE BROKERS?
But Diamond noted wirehouse advisers might be more likely to consider offers from IBDs following the Department of Labor's recent targeting of backend recruiting bonuses in the wake of the fiduciary rule.
Those bonuses, Diamond says, "are what make the wirehouse deals so aggressive. If wirehouses and other brokerage firms are unable to offer the same sort of competitive deals, it will spur an aggressive shift toward the independent space."
"We plan on being one of the winners," says new CEO Jamie Price.
Price says his priority is to begin a "listening tour" with Advisor Group executives and advisers to determine the company's "baseline" about its platform, capabilities, service level and technology.
The rapidly changing advisory marketplace will result in "big winners and big losers," Price says, with the winners "gaining a lot of ground. We plan on being one of the winners."
OPPORTUNITY: BOOMER'S WORRIES
Baby boomers worried about outliving their money offer the advisory industry "a real opportunity" to thrive, combined with Generation X's impending inheritance of wealth and on-demand service requirements, according to Price.
He also touts Advisor Group's status as a "recently independent company" with new owners (Lightyear Capital) who both know the business and are well funded.
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The biggest challenge facing the IBD is change, says Price. "People have to think differently and not fear change," he said. "They have to see it as an opportunity."
Asked about the declining commission revenues and sales of nontraded REITs that have bedeviled IBDs for the past year, Brown says Advisor Group sees "a change in clients' needs…with more assets moving to fee-based accounts."
Advisor Group will continue to target the mass affluent market, which "remains very much in need of advice," Brown says.
While the election of Donald Trump has created "uncertainty" regarding the implementation of the DoL's fiduciary rule, Advisor Group is "ready to comply" with the final rule and "support adviser practices," she adds. The IBD will also "continue to support commission-based business in IRAs and tax-qualified plans," Brown says.
KUDOS AND CAVEATS FOR NEW CEO
Price has spent more than 20 years in the financial services industry and was at UBS Financial Services from 2002 to 2010. Before joining UBS, Price worked at Prudential Securities for more than a decade rising to president and chief operating officer. He also headed up financial adviser development for Shearson Lehman Hutton and began his career at E.F. Hutton.
Most recently Price was chief operating officer for 1-800DOCTORS, a technology startup that worked with medical professionals.
Price's hire "is a step towards the IBD market getting more institutional in nature," says Chip Roame, managing partner, Tiburon Strategic Advisers.
"He will bring a large corporate and a field management orientation, two features, which most IBDs have lacked," Roame says. "His challenge will be to boost profit margins at Advisor Group at a time when margins may be challenged by the DoL fiduciary standard. And Price's time outside of the industry should be a plus and allow him to have more creative thinking in a business that needs such."
Industry consultant Tim Welsh, president of Larkspur, Calif.-based Nexus Strategy also praised the move.
"I think it is a big coup for Advisor Group," Welsh says. "To get someone of his caliber from one of the wirehouses bodes well for Advisor Group, and perhaps is a leading indicator that life in the wirehouses is shaping up to be quite grim."
But Diamond warns that Price has to reassure Advisor Group advisers facing both a new owner and new boss.
"Erica McGinnis was a very respected leader and one who grew up in the IBD world," Diamond says. "Jamie, while an experienced leader, is an outsider and will have an uphill battle to earn the advisers’ trust."
Asked if McGinnis would be remaining at the company, an Advisor Group spokesman said: “Erica McGinnis is executive vice president, head of transitions at Advisor Group. This is an absolutely critical role and one where she continues to add significant value to our company every day.”
As for Lightyear Capital, Diamond says "anytime a firm has a private equity owner, two things are certainties: cost cutting and another disruptive sale in the next three-to-six years. Lightyear, while a well-established and experienced player in the wealth management space, will undoubtedly seek to squeak out more profits as they pretty up the firm for another transaction. Neither is a positive for Advisor Group advisers and stakeholders."