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$250M RIA leaves Triad over Ladenburg’s leveraged product policies

An RIA with $250 million in assets under management has bolted from Triad Advisors, in what is at least the second loss relating to directives from parent firm Ladenburg Thalmann.

Michael Piershale of Piershale Financial Group left Triad, the No. 29 independent broker-dealer, in late February because Ladenburg forbade the practice from using leveraged ETFs in its portfolios, Piershale says. The Chicago-area firm went fully independent rather than trying another IBD.

Piershale’s three-advisor practice uses tactical asset allocation, placing about 20% of a portfolio into leveraged ETFs in one model that has a higher concentration in the products. Piershale says he left because Ladenburg banned his clients from them. Ladenburg did not confirm the change.

The firm followed Triad’s onetime largest RIA, ACG Wealth, which exited in October 2016 after Ladenburg refused to allow ACG to launch a hedge fund, according to co-founder David Millican. Several major practices have recently broken away from the Atlanta-based IBD, Millican says.

Triad CEO Jeff Rosenthal has said the firm, which specializes in hybrid practices, set records in its recruitment of advisors and offices in 2017 for the second year in a row. For example, two practices brought a combined $2.4 billion in client assets from Securian Financial Services and Signator Investors.

In a phone call from Triad about a year and a half ago, Piershale learned of Ladenburg’s mandate, he says.

“They absolutely would not budge,” he says. “I was disappointed that it just came out of the blue and, in the beginning, they were going to make us shut it down with no time to get out at a convenient time. Other than that, they were just a fantastic company. I mean, it grieved us to leave them.”

Among recent career changes, Merrill Lynch lost brokers managing $2.2 billion to rival J.P. Morgan Securities.
February 20

Representatives for Triad and Ladenburg declined to comment on Piershale’s exit or the IBD network’s exact policy on leveraged products.

Piershale had joined Triad in 2011 following more than 10 years with Raymond James and 15 years with Edward Jones, according to FINRA BrokerCheck. Advisors Ben Barzideh and Piershale’s brother John make up the other advisors at the Crystal Lake, Illinois-based practice.

The RIA disclosed $251.4 million in AUM in its last SEC Form ADV, and Charles Schwab Advisor Services acts as the firm’s custodian. The three advisors gave up their Series 7 licenses as part of the full RIA status, which Piershale described as an emotional decision following decades in the brokerage space.

Most BDs require training for recommendations of complex investments like leveraged ETFs, which use derivatives and debt to boost index returns. Piershale says he never found out exactly when Ladenburg decided to ban his clients from them and he doesn’t believe the change was related to the fiduciary rule.

Leveraged investing amplifies returns during bull markets but carries a risk of margin calls in downturns. Piershale’s team uses the products “under very controlled circumstances,” he says, noting that the firm has metrics it calls short-term, medium-term and long-term sales signals to determine their use.

“The only times we double leverage are when all three signals are positive,” Piershale says. “If one goes negative, we stop leveraging because our history has shown that when all three signals are positive, historically the risk has been very low and the upside potential has been very high.”

With 2016 revenue of $173.2 million, Triad is the second largest of Ladenburg’s five IBDs, according to Financial Planning’s latest annual FP50 rankings. Its revenue and number of producing representatives (600) declined that year for the first time in at least five years amid contraction in the IBD space.

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