With PE backing, Kestra places veteran CEO atop newly acquired IBD
Kestra Financial hired Michelle Barry, the veteran CEO of an insurance company’s independent broker-dealer, to turn around H. Beck, the firm it acquired earlier this month.
The former Hornor, Townsend & Kent CEO plans to tap the resources of the firm’s new parent to grow H. Beck’s business.
“It’s a great advantage to have access to private equity capital for a firm that definitely wants to enhance its technology,” Barry said in an interview this week on her first day at the Bethesda, Maryland-based firm.
Barry’s first focus will likely be making account opening, trading and other platform functions more seamless for the firm’s roughly 600 advisors and their clients, she says, because they “definitely need integrated solutions.”
Kestra’s purchase of H. Beck closed in early December in a deal reflective of both the challenges and the growth prospects in the IBD space. Kestra, the No. 13 IBD by revenue, acquired H. Beck from Securian Financial Group, the parent of No. 18 IBD Securian Financial Services. The firms didn’t disclose the terms of the deal.
Insurance firms, such as onetime Kestra owner NFP and National Planning Holdings owner Jackson National Life Insurance, have pulled back from IBDs in recent years amid preparations for the fiduciary rule. Private equity firm Stone Point Capital acquired majority ownership of Kestra from NFP last year.
NFP’s holding company retained a minority stake in Kestra, however, as well as a long-term reciprocal agreement for Kestra to be NFP’s preferred IBD and RIA. Securian also picked up a minority stake in Kestra under the H. Beck deal, according to the firms’ announcement of its closure.
IBDs saw widespread contraction last year attributable to falling commission revenues and compliance expenses under the Department of Labor rule. Kestra, its new independent subsidiary H. Beck and other IBDs now appear ready for a rebound, though, according to consultant Tim Welsh of Nexus Strategy.
“It’s really been a lot of playing defense for the broker-dealers of the world. So now it seems like 2018 will be the year they get to play some offense,” Welsh says, noting independent firms’ tech, the breakdown of the Broker Protocol and firms’ adjustments for the rule as factors working in their favor.
“It seems like there could be some wind in their sails, so it makes sense to bring in a growth-minded president to take advantage.”
Barry had served as CEO of Hornor, Townsend & Kent, an IBD subsidiary of the Penn Mutual Life Insurance Company, for about a decade. The Philadelphia-area company’s “future is in great hands” with former COO Tim Donahue replacing her as CEO, she says.
Barry doubled her previous firm’s annual revenue, boosted its advisor retention and remade its technology, according to Kestra’s announcement of her appointment this week. A spokesman for Penn Mutual didn’t respond to her new firm’s description of her tenure but provided a statement.
“Michelle hired Tim five years ago to run all operations for HTK and we are glad to have a very smooth transition of leadership with Tim becoming President and CEO as he is widely known and highly regarded by our advisors and field leaders,” Tom Harris, executive vice president for distribution, said in a statement. He added that the firm wishes both of them well in their new positions.
Before joining her prior firm in 2005, Barry had worked nine years in financial services, starting at Salomon Smith Barney, according to FINRA BrokerCheck. The news of Kestra’s deal with Securian “really piqued my interest,” Barry says, noting the firm’s transition from full ownership by an insurance firm.
Her long-term technology plans include a wealth management platform for clients of all levels, possibly through an automated investment tool. Pershing, which is a custodian to both Hornor, Townsend and H. Beck, has developed multiple partnerships with tech firms to help affiliated advisors boost their capabilities.
She also hopes to bring more assets and advisors to the firm through recruiting, offering her team as a partner to help independent advisors grow their businesses. H. Beck, a 33-year-old firm owned by Securian for the past nine years, has roughly 540 offices, primarily in the Mid-Atlantic and the Northeast.
“I’m really looking to be that partner that helps with the back-office support and lets advisors serve their clients as they see fit,” she says.
While she expects to “look and see what we can leverage and take advantage of, being part of Kestra,” she adds, she wants “to make sure H. Beck stands on its own and certainly has its own compliance and infrastructure.”
H. Beck had moved up to the No. 40 IBD in 2013, when its revenue grew by 14% to $121.4 million for the year. Last year, however, the current No. 44 IBD’s business shrank by 8% to $107.8 million, the second decline in a row and a five-year low.
H. Beck manages about $15 billion in client assets, the firm says. Former President Loyall Wilson had retired from the firm by the August announcement of Kestra’s deal to acquire it, and interim President Scott Thorson will remain COO under Barry.
“Michelle’s executive experience in the broker-dealer/RIA industry, paired with her expertise in advisor technology and practice management, allows her to hit the ground running and to enhance H. Beck’s value proposition,” James Poer, the CEO of Austin, Texas-based Kestra, said in a statement.
Although private equity backing always comes with the risk that the firm will spin off its investment, Barry’s focus on technology fits well with the “Amazonification of everything,” according to Welsh, the consultant.
“Wealth management as a whole is way far behind that vision, so now is the time to get there as fast as you can before someone beats you to the punch,” he says.