Ladenburg firm shifts to greater tax emphasis, adds 5 firms with $441M
GRAPEVINE, Texas — The playing field for independent broker-dealers offering tax-centered wealth management just gained a new competitor.
Securities Service Network has grabbed five practices with a combined $441 million in client assets, as it bulks up its tax services and recruitment of advisors who are CPAs or enrolled agents.
The moves consist of 16 advisors who joined SSN from National Planning Holdings’ IBDs months after LPL Financial acquired their assets. A Ladenburg Thalmann subsidiary, SSN is the No. 43 IBD, and the firm is entering a space currently dominated by two players: HD Vest Financial Services and 1st Global.
Executives from the three firms attended this week’s FSI OneVoice conference, where the existing players noted their long track records in planning centered on tax services, and SSN’s CEO Wade Wilkinson revealed his firm’s increased tax focus.
The new tax law, which President Trump signed in December, played a role in SSN’s new approach, Wilkinson says. The Knoxville, Tennessee-based IBD had been recommending tax planning as a best practice to its advisors for several years, but the overhaul presents new challenges and opportunities, keeping advisors busy with questions from clients.
“We recognized last year that approximately a quarter of our advisors — and most of our top advisors — are either in tax planning or are in the tax prep business, and we decided at that point that that was something that we have to focus on, both in terms of building resources for our existing advisors who want to become tax savvy and for recruiting those types of advisors to SSN,” Wilkinson says.
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Revenue at SSN, which has more than 400 practices and about $13 billion in client brokerage and advisory assets, dropped 11% to $111.6 million in 2016 amid contraction at most IBDs. The firm added roughly $7 million in new revenue through recruiting in 2017, Wilkinson says, describing the year as meeting the firm’s goals.
What sets it apart from other firms is its emphasis on advisors who are “rugged individualists,” as Wilkinson refers to them.
Indeed, SSN had carved out a specialty in serving solo practitioners. After several years of advocating for tax planning as a powerful way for advisors to grow their practices, SSN is now shifting to a bigger emphasis on tax services and focusing on recruiting more advisors who are also CPAs and enrolled agents.
“We welcome the solo practitioner, and that’s really who we are focused on recruiting, not to the exclusion of producer groups, of course,” he says. “But that tax-savvy solo practitioner is going to be welcomed at SSN without having to join a larger group.”
The five new practices each consist of more than one advisor, however. SSN’s newest additions include Insight Financial Services, an Overland Park, Kansas-based practice with $180 million in client assets, and Fayetteville, North Carolina-based Brown & Associates Investment Services, which has $105 million.
Both practices came to SSN from National Planning in October, according to FINRA BrokerCheck. The following month, Greenville, Wisconsin-based Dercks, Engels & Lautenschlager Financial Services, which has $90 million in client assets, also joined SSN from SII Investments.
SSN’s new tax emphasis served as a contributing factor in attracting the new teams, as well as a cultural fit, services and SSN’s long-term stability, according to the firm.
Representatives for SSN said that some of the new practices include CPAs and enrolled agents, but they didn’t immediately respond to a request to know the exact number joining the firm in the moves.
LPL, the No. 1 IBD, has struggled to retain the incoming crop of advisors from National Planning’s network since it acquired NPH’s assets in August. More than 400 advisors with over $18 billion in client assets have left NPH firms since the close of the LPL deal.
A spokeswoman for National Planning didn’t respond to a request for comment, and a spokesman for LPL declined to comment. LPL plans to release specific figures on its first wave of NPH advisors coming to the firm in its earnings announcement later this week.
In response to SSN’s strategic shift, the incumbents in the tax-centered planning space cited their greater experience even as one of them noted the opportunities posed by the idea.
Dallas-based 1st Global enjoyed a strong recruiting year in 2017, according to President David Knoch, who declines to state specific figures. More than 400 firms have aligned with the IBD, and tax-focused planning should be viewed more as “the true practice of wealth management” rather than a niche, Knoch says.
“We are founded by CPAs and serving the powerful enterprise CPA firm market isn't a growth or survival strategy for us, it’s all we have done for more than a quarter century,” he said in an emailed statement. “CPA firms affiliate with us because of our business-building expertise with multi-discipline, enterprise CPA firms. That’s what makes us so unique.”
Meanwhile, HD Vest, which is based in nearby Irving, Texas, is placing greater emphasis on recruiting experienced advisors, CEO Bob Oros says. TaxAct parent Blucora acquired the No. 19 IBD for $580 million in 2015, and Oros joined the firm last year from his previous post as Fidelity's RIA chief.
The advisor headcount in Blucora’s wealth management unit slipped 4% year-over-year to 4,392 in the third quarter, but its revenue grew 8% to $86.8 million.
Out of more than 200,000 tax professionals across the country, fewer than 20% of them have integrated planning into their practices, Oros says.
“It’s a big ocean,” he says. “What we have as our natural advantage is we have a 35-year head start on anybody wanting to get into that. We understand tax professionals better than anyone, and the strength of our community has been one of the real eye-openers for me.”