Is the sale by Ameriprise Financial of its Securities America advisory services unit to Ladenburg Thalmann a harbinger of yet another wave -- or wavelet -- of consolidation in the asset management industry?
Certainly back in 2009-2010, in the wake of the major crash in markets and the dramatic pullback of shell-shocked investors into safe havens like bank accounts, there was a wave of consolidations of all sizes and a significant decline in the overall number of financial advisors. Now, reports are showing that investors are again pulling their money out of not just equities but also fixed income and hybrid funds and putting their assets into money market funds, the types of investments that hardly require the assistant of an advisor.
So the question has to be asked: Even after the significant contraction of the industry a year or two ago, are we likely to see yet more?
S&P asset management industry analyst Chris Maimone thinks so, but he said Ameriprise's $150 million sale of Securities America, the nation's seventh-largest independent broker-dealer, may not be part of it.
He told On Wall Street, “Equity volume is trending lower, and as we see further marginal economic date coming out, it dampens investor confidence and reduces investor activity. It’s certainly feasible that we could see more consolidation, especially of smaller players who have less flexibility and staying power. It is reasonable to expect more consolidation.”
He adds, “At the same time, this particular sale of Securities America by Ameriprise has more to do with Ameriprise wanting to focus on their brand. In addition, they did book a profit on the sale.”
Haywood Sloan, a principal at Diversified Services Group, disagrees about the likelihood of any new or renewed consolidation trend in the assets management sector of the financial services industry. “I think that after 2009 and 2010, which saw a huge wave of consolidation, we’re still working through all that. It will take time for everything to get digested,” he said. “I wouldn’t be surprised if we saw consolidation take a breather.”
“Still,” he added, “there may be some consolidation that is more about growth, not shrinkage.”
Paul Reilly, CEO of Raymond James, agrees, saying in an article on the company’s website yesterday that the current environment is “not the same” as the one in 2008-2009. He writes that financial companies in general today are more liquid and less leveraged, so expects to see fewer failures and fewer consolidations.
As for the impact of the sale of Securities America, S&P’s Maimone says it will probably be minimal, at most. “You won’t see a net increase or decrease in offices and personnel,” he explained, “so the competitive environment in individual markets shouldn’t change.”
He added that there are unlikely to be many departures from Securities America going forward, saying, “Ameriprise announced that it was putting the unit on the block months ago and so people who wanted to leave already have left.”
For more details and background on the Ladenburg Thalmann purchase of Securities America, take a look at these stories: