Waddell & Reed executive shake-up follows loss of hundreds of advisors
A slumping but prominent independent broker-dealer has shuffled its leadership after losing more than 300 advisors this year amid challenging times in the space.
Waddell & Reed head Thomas Butch stepped down, giving way to COO Shawn Mihal at the 11th largest IBD, the suburban Kansas City-based firm disclosed last week. The firm reported its first revenue drop in at least five years in 2016, and its headcount has fallen by 315 advisors to 1,481 in the past 12 months.
Butch had led the firm since 2005 and spent nearly two decades there. The firm’s business has declined as IBDs struggle to adjust to the Department of Labor’s fiduciary rule and keep up with new technology. The largest IBDs posted worse returns in 2016 than they did at the end of the Great Recession.
The IBD’s parent, Waddell & Reed Financial, appointed a new COO, CFO and president of Ivy Distributors, a distributor of Ivy Funds previously led by Butch. Former Waddell & Reed Financial CEO Henry Herrmann also said on Monday that he will retire from his current role as chairman of the board.
The changes to the executive team “are expected to broaden and provide greater support to the growth, productivity and profitability initiatives outlined earlier this year,” according to the firm’s announcement last week.
Private equity-backed parent Advisor Group made the shakeup at a challenging time for IBDs.September 13
The independent broker-dealer landed four recruits from Merrill Lynch, Edward Jones, Wunderlich Securities and Ameriprise.October 11
Onetime company president Derek Burke, who had previously reported to Butch, resigned in February. FSC Securities hired Burke as its CEO months later. Butch had taken the reins of the Overland Park, Kansas-based Waddell & Reed back in 2005.
Company executives did not make Butch available for an interview about his reasons for stepping down and his plans for the future. Spokesman Roger Hoadley instead provided a statement from Butch praising “an amazing, fulfilling 18 years” with the firm and pledging to assist in the transition.
“I have been blessed to spend my time in the company of so many great people,” Butch said. “I will carry Waddell & Reed in my heart and look forward to its ongoing success.”
In a separate statement, Waddell & Reed Financial CEO Philip Sanders thanked Butch for his service and wished him good luck.
The firm’s board promoted current CFO Brent Bloss to COO, appointed current Chief Accounting Officer Benjamin Clouse to be CFO next year and tapped Head of Global Relationship Management Nikki Newton to take over Ivy Distributors. Herrmann, who left the CEO role last year, will retire from its board on the date of the firm's April stockholder meeting.
Mihal, the incoming president of the broker-dealer, had joined the firm in March 2015 as its chief compliance officer. He started in the financial services in 2001 with Great American Advisors, later moving over to Transamerica Financial Advisors in 2010, according to FINRA BrokerCheck.
“Combined with our other executive members, I am confident that we have in place a leadership team with the requisite business acumen to lead into the future and position the company for long-term success amid a rapidly changing industry,” Sanders said.
GROWTH TAPERS OFF
The IBD’s assets under administration have ticked up by $3.4 billion year-over-year to $55.5 billion, according to its latest earnings report. However, the firm’s headcount has dropped off from 1,796 advisors in the year-ago period, and overall profits at the parent slipped 29% to $38 million.
From 2011 to 2015, the IBD rose from the 16th largest in the country to its current position just outside the top 10, according to its annual disclosures to Financial Planning. Annual revenue jumped 58% over that span to $526.1 million.
Last year, though, the firm’s revenue dropped 7% to $487.4 million amid contraction across the IBD space. The firm’s parent pledged in its annual report to remake the IBD into a “self-sustaining, fully competitive entity” as one of four strategic goals around products, investments and sales, Hoadley said.
“The recent executive changes don’t alter that strategy, though they further support it,” he said in an email.