© 2020 Arizent. All rights reserved.

With Acquisition, CEO Describes HD Vest's Pivot: Data, Digital and Millennials

Register now

For HD Vest advisors, Roger Ochs says that being acquired for $580 million by Blucora, the onetime Internet giant known as InfoSpace, will change nothing – and everything.

The CEO promises that his firm's advisors will see no interruption in the day-to-day support of their clients, nor will they witness any changes in the management they are accustomed to. "There will virtually be no change for our advisors," he says.

However the $580 million deal allows his firm to pivot into the expanding digital space of financial planning, where Ochs says HD Vest will be able to bring its proprietary data mining capabilities and lineup of human advisors to the 5.5 million customers of Blucora's online tax preparation platform, TaxAct.

The opportunity and goal, Ochs says, is to widen the reach of HD Vest's unique advisor approach by tapping into TaxAct's base of millennials and self-service users. "In today's world, financial advisors are having a hard time appealing to millennials," he notes. "This might be a way."

If that premise sounds very much like a hybrid robo strategy, Ochs won't claim it.

"I wouldn't call it a robo," Ochs says. "We have an advisor in every market, so we have the opportunity to provide a live advisor, who by the way is a tax professional. When I think of robos, I think of them as not being real. You could say it's a competitor to the robo."


HD Vest – which placed 21st in this year’s FP50 list of the nation’s largest independent broker-dealers with nearly $305 million in revenue – has a network of more than 4,500 investment reps with more than $36 billion in assets under management. The firm is the largest of the three biggest broker-dealers that help CPAs become registered as investment advisers; the other two are 1st Global and Cetera Financial Specialists, a subsidiary of Cetera Financial Group.

Ochs says that HD Vest had been approached by a number of potential suitors. But Blucora's initial proposition in July of marrying TaxAct with HD Vest's technology and tax professional ranks was the most appealing. "They wanted to be able to unlock the value of the relationships that they have with those taxpayers, and were pursuing a strategic partner like HD Vest that could help them do that," Ochs says.

What helped push the deal, Ochs says, was HD Vest's development of its proprietary data repository, the 1040 Analyst. In an interview last year with Financial Planning, Ochs explained that it helps create "tax alpha" for their clients, a feat that can be easier to achieve than investment alpha.

Tax professionals download the tax data of their clients into the repository. A proprietary algorithm allows advisors to data mine those tax returns to come up with investment solutions from the tax data itself, he explained, and the data is fed into a program called VestAdvisor Select, which is a fee-based money management platform that allows advisors to make changes to it.

"If you think about our value proposition, where we can upload data into our repository and teach our advisors how to data mine, wouldn't it be great if we could take some of that same technology and knowledge and help our soon-to-be partners at TaxAct to be able to identify financial planning opportunities for those 5.5 million customers and refer those to an HD Vest advisor?"


Last year, Ochs told Financial Planning he was proud of the data capability HD Vest had developed. "I don't want to call it the holy grail, but having the client's tax data and that relationship gives our advisors an unfair advantage over other advice providers out there," he said at the time.

Now, in a financial advisory industry waking up to the promise of big data, it means lots of zeroes on a check. This is why Ochs says that the $580 million price tag that Blucora will pay for his firm is fair.

"We're one of the fastest growing independent broker-dealers out there, particularly in this niche, which is low-risk, unique, and where we have high retention of advisors," he says. "Now with TaxAct and HD Vest, [Blucora] can reposition themselves completely in the marketplace and create synergy between those two businesses.

"If you didn't have that all together, maybe you could say it was high or it wasn't high, but you have to consider the synergy opportunities between the two businesses. A revenue multiple is the worst way to value a business anyway.

"From my perspective, I think they paid a fair price for the company. When you go through a full negotiation, you're going to get a fair price. They're really smart people. They're not just a flash in the pan. They've got a good history of running businesses that are publicly traded. They don't think they overpaid, or they wouldn't have done it."


Ochs is upbeat about HD Vest's growth opportunities, and sees a compelling message in an advisory environment where a fiduciary focus has gained momentum.

"I don't think this deal makes us competitive; we're already competitive," he says. "Our niche is the tax professional world, and I think they're uniquely qualified to offer financial advice. We're not chasing around wirehouse brokers and trying to recruit them into HD Vest. We're not chasing around insurance agents and trying to recruit them into HD Vest. Our philosophy is we want to focus on that niche of the tax advisor."

He wants to see more CPAs and tax professionals enter the HD Vest fold. "What's great about our business model is that there are 220,000 tax professionals out there; there's a ton of prospects for us. We're a leader in our space but we've still got a big pond to fish in.”

Asked about the recent troubles that have plagued LPL and RCS, Ochs is comfortable distancing his firm from IBD rivals.

"The beauty of our business is that we're in a niche, and the other firms are in their own niches. We just don't play in that space. I'm not disparaging what they do at all; it's just a different business model."

Read more:

For reprint and licensing requests for this article, click here.