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Fiduciary rule fallout: Securities America to pick up 210 advisors

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Faced with mounting compliance costs that are set to increase further with the implementation of the fiduciary rule, more wealth management firms are searching for ways to cope — including selling their operations.

In the latest move, just months before the rule goes into effect, Securities America is acquiring parts of smaller rival Foothill Securities, an independent broker-dealer with 210 advisors. A spokesman was unable to immediately give more details on which assets were part of the deal.

Foothill CEO Steve Chipman was motivated to pursue the sale in part because of rising compliance costs, which are due to increase further with the implementation of the Department of Labor's fiduciary rule, he said in a statement.

The new regulation, which imposes a stricter standard of care on retirement accounts, goes into effect early next year, and has been forcing firms to reconsider their operations.

In July, Stifel sold the independent broker-dealer unit that it had acquired as part of its purchase in 2015 of Sterne Agee, a Birmingham, Ala.-based brokerage and investment bank.

"I think the DoL rule has a disproportionate impact on the independent business, and that affected our decision-making," Stifel CEO Ron Kruszewski told analysts during a conference call in August.

Stifel bought Sterne Agee for $150 million. The St. Louis-based firm sold Sterne Agee's correspondent clearing and independent advisor business for approximately $50 million, according to the company. The IBD had approximately 540 advisors and about $11 billion in assets.


Foothill advisors operate in 12 states, and the firm has $5.14 billion in client assets, according to Securities America.

Foothill, which is based in Santa Clara, Calif., reported $39.8 million in annual revenue and net loss of $674,000 for 2015, according to SEC filings.

In addition to the help with compliance, Foothill opted for Securities America, Chipman said in a statement, because of "better technology, broader asset management resources and practice management programs for the full practice life cycle."

Securities America, which is a subsidiary of Ladenburg Thalmann Financial Services, has more than 2,000 independent advisors and $58 billion in client assets, according to the firm. The firm ranked 10th on Financial Planning's annual IBD ranking by revenue.

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In recent years, Securities America has completed eight other deals that brought over about 900 advisors, according to the firm, which is the based La Vista, Neb., a suburb of Omaha.

"Foothill's advisors can be confident they're joining a broker-dealer with the right people and resources to help them promote and grow their practices," Jim Nagengast, CEO of Securities America, said in a statement.

Nagengast has been with the company since 1994 and CEO since 2010, according to Securities America's website.

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