A holding company with a specialty in tapping the growing consolidation of independent broker-dealers has acquired Purshe Kaplan Sterling Investments.
Wentworth Management Services purchased the hybrid-serving IBD with the help of a $43.5 million loan, Wentworth announced Tuesday. The firms didn’t disclose the full terms of the deal, which closed Nov. 30.
PKS and firms such as Mutual Securities and Private Client Services act as lower-cost alternatives to large IBDs for dual-registered practices. The popularity of such IBDs has been growing in recent years amid the larger move of advisors and assets to the independent channel, according to research firm Cerulli Associates.
Consolidation has been roiling the IBD space for years, with LPL Financial’s acquisition of the assets of National Planning Holdings being the most recent and significant example. Advisor Group and the majority stake of Kestra Financial both changed hands last year in private equity-backed deals.
“There is a seminal change taking place right now in the wealth management industry as independent firms grow and gather assets to rival the wirehouses and large banks,” Wentworth CEO Ryan Morfin said in a statement about the firm’s acquisition of Albany, New York-based PKS.
“At the same time, costs of technology, security and compliance are rising and the industry is consolidating rapidly. PKS is an established firm with the scale and infrastructure to meet these challenges, and partnering with them will enable us to smoothly acquire and integrate additional independent broker-dealers to the Wentworth family.”
PKS opened in 1993 as a regional brokerage, but it now has 485 affiliated practices and 1,200 registered representatives across all 50 states. The firm clears trades through Fidelity’s National Financial Services. PKS’ core management team remains in place after the transaction, the firms said.
“Ryan and the Wentworth team fully understand and support the business we've built at PKS,” Peter Purcell, CEO of PKS, said in a statement. “Their partnership will supply PKS with resources, talent and capital to pursue our vision for the firm and continue to grow in an intelligent and prudent manner.”
Wentworth owns and operates U.S. broker-dealers, according to its website, which notes the firm is is not a private equity fund and has a “long-term hold bias toward investments.” The firm’s strategy revolves around acquiring IBDs and capturing economies of scale to service the firms’ advisors.
Monroe Capital arranged the loan, which is a senior credit facility, and acted as the administrative agent, according to the two companies. Morrison Foerster advised Wentworth on the acquisition and King & Spalding served as its counsel on the financing. The Hamburger Law Firm, Tabner, Ryan & Keniry and Jackson Lewis advised PKS.
In February, PKS agreed to pay restitution of $3.4 million and a $750,000 fine to settle allegations by FINRA involving a representative's sale of nontraded REITs and business development corporations to an American Indian tribe. The firm failed to properly supervise the representative, who made the sales without giving the tribe the proper volume discounts, according to the regulator.
PKS paid the settlement the following month without admitting or denying the allegations. The firm also agreed to a review of its procedures in connection with the case.