Ladenburg buys insurance distributor for $7.2M, Securities America adds OSJ
Ladenburg Thalmann’s annuity distribution unit acquired a new division, best known for fixed-index products and its selling agreements covering 3,000 financial advisors.
The firm’s founding family sold its insurance distribution company but held on to its office of supervisory jurisdiction under Ladenburg’s Securities America.
The parent firm of five independent broker-dealers agreed to buy certain assets of Kestler Financial Group for $7.23 million, and up to $1 million more in earn-out payments, Miami-based Ladenburg disclosed on Sept. 7. The deal followed record FIA sales in the second quarter.
Ladenburg purchased the firm to keep a “leadership position in the independent financial advice space at a time when insurance and annuity solutions are becoming increasingly important to individuals and families across the country,” CEO Richard Lampen said in a statement.
Father and son founders Tom and Jason Kestler will keep working out of their current office in Leesburg, Virginia after the transaction. Jason remains president while joining the executive team at another Ladenburg insurance subsidiary, Highland Capital Brokerage.
Kestler did not sell the assets of Branch Development Partners, their Securities America-affiliated OSJ, according to the terms of the asset purchase agreement. Tom Kestler, a CFP who left Centaurus Financial in July after 11 years, now acts as the OSJ’s registered principal.
Emily Kestler also serves as a fellow registered principal at the family OSJ. The planning practice and the insurance distribution firm share the same office in Leesburg. Kestler’s annuity and insurance selling agreements extend to 20 IBDs, RIAs and other firms.
“We are becoming part of another company with a rich tradition and long history of success, and at the same time, we will remain everything you've always known and loved about Kestler Financial Group,” Tom Kestler said in a LinkedIn post about the deal.
“Our team remains fiercely producer-focused,” he added, “and we know this acquisition will provide substantial growth opportunities for all.”
Revenue from FIAs surged to well over the existing mark in the second quarter, while VAs stabilized after 17 straight quarterly declines.
The IBD network is following its rivals in launching a centralized program on succession planning and acquisitions.
The IBD network disclosed the renewal of its clearing agreement, along with three firms’ intention to self-report possible mutual fund violations to the SEC.
He and representatives for Centaurus didn’t immediately respond to requests for comment on the OSJ’s change of affiliation and the sale of the insurance distribution firm to Ladenburg. Representatives for Securities America didn’t respond to a request to know the size of the OSJ.
The OSJ is affiliated with Ladenburg’s largest subsidiary on both its brokerage and corporate RIA platforms, according to Tom Kestler’s FINRA BrokerCheck and SEC filings. The 36-year veteran of the financial services officially joined Securities America on July 3, BrokerCheck shows.
Tom and Jason Kestler had launched the independent distribution firm, which provides marketing, research and training relating to sales of annuities and life, long-term care and disability insurance, in 1993. The acquisition closed on Aug. 31 of this year.
Kestler has “a long, successful history in the fixed-index space working with the financial advisors of independent broker-dealers across the country,” Jim Gelder, CEO of Ladenburg Thalmann Annuity Insurance Services, said in a statement.
Ladenburg’s acquisition also includes a restrictive covenant on Kestler limiting its competition as an insurance intermediary for five years, along with a non-solicitation agreement covering insurance producers who have written policies through Kestler in the past year, the filing states.
The deal will cost Ladenburg a cash payment of more than $1.6 million at closing, $165,000 on the first anniversary of the close date and a promissory note for almost $5.5 million. Ladenburg agreed to pay Kestler more than $35,000 per month until the maturity date in 2036.
In addition, Ladenburg will pay the sellers at least $100,000 in its first annual payment based on the adjusted net revenue of the business acquired by Ladenburg’s annuity distribution unit. The yearly payments will continue for five years, or until they reach a ceiling of $1 million.
Sales of FIAs rose 17% year-over-year in the second quarter to $17.6 billion, which is also 12% higher than the previous quarterly record set in the fourth quarter of 2015, according to the LIMRA Secure Retirement Institute. FIAs now constitute 30% of all sales of annuities.
“This announcement marks the start of an exciting new period of growth for our insurance distribution business, Jason Kestler said in a press release, adding that it became clear that Ladenburg and its subsidiaries “share the Kestler team’s longstanding focus on advisor service.”