Advisor Group CEO Opens Up About Reverence Deal, Brown’s Departure
May 10, 2019
By Janet Levaux, ThinkAdvisor
Price talked with ThinkAdvisor about the sale and explained why Valerie Brown will leave Advisor Group.
Advisor Group CEO Jamie Price had quite a week, wrapping up the sale of the 75% of the firm to private-equity group Reverence Capital Partners from Lightyear Capital, PSP Investments and others.
After Thursday’s announcement, Price answered questions on Friday about the deal and shared his thoughts on what it means for the company he leads, which includes FSC Securities, Royal Alliance Associates, SagePoint Financial and Woodbury Financial Services, and what it says about the independent broker-dealer industry.
Recruiters like Jon Henschen, of course, are following the sales process closely. “The Advisor Group advisors have grown accustomed to receiving retention bonuses with the ownership changes they’ve experienced,” Henschen said. But given that some recent PE purchasers of other IBDs did not offer retention bonuses to advisors, he is skeptical about what the latest deal means for them.
“With Reverence being a new player in the IBD channel, we don’t have a track record to gauge,” Henschen explained. “It will be a wait and see situation on if they decide to go public or flip the broker-dealers within a couple of years.”
Price’s conversation with ThinkAdvisor has been lightly edited for clarity.
What is Advisor Group’s retention-bonus plan?
What did Advisor Group get for Reverence’s equity stake?
“I won’t comment on pricing … for a whole host of reasons,” he explained. (Reports had circulated about two weeks ago of Centerbridge Partners offered more than $2 billion.)
Why is Executive Chair Valerie Brown leaving?
“Lightyear pulled her out of retirement, and now three years later, she’s returning [to it]. … The timing was perfect for her,” Price said.
Since Brown has been a “tremendous partner,” her departure is “bittersweet,” he added.
News of Brown’s exit came a day after BNY Mellon Pershing announced CEO Lisa Dolly was leaving the firm July 1 — and both have been significant role models and advocates for women in the business.
What is Advisor Group’s commitment to supporting women leaders in the advice business?
“Our leadership team is about 50% female today, and the whole company — its employees — are 51% women. There is lots of depth and breadth in our senior leadership … and we are passionately working to get industrywide advisor figure for women up from where it is now,” he said, which is at about 15% female.
Advisor Group just wrapped up its yearly leadership event for women, W Forum, which included over 300 participants, Price says.
What makes the IBD business attractive to the PE sector?
“The smart money, if you will, is focused on its fiduciary responsibility to smart investors and has been very interested in this industry. There’s a strategic rationale, with retirement assets predicted to grow three times GDP in the next few years,” Price said.
“Our [independent] segment is taking marketshare from the employee channel, and its exponential growth … is unusual,” he added.
“How do we grow? We do not have products from another [common] entity to sell for, which should make our advisors proud that they are part of an industry of choice,” Price said. “The smart money is saying this is a great industry, and that’s why private equity is so enamored with it — which is good for advisors and good for us.”
Advisor Group has invested more in its growth, technology and other areas in the past three years “than ever.” And Reverence — like Lightyear — “understands the marriage will be perfect if it can help advisors grow,” he explained. The new owner “will be the same [but] with new eyes, new thoughts and more around the sector.”
Why did Reverence step in now as a big investor?
“It looked at our five-year organic growth plan and … saw that we want to do it better and faster, which makes it a great alignment.”
Is bigger better? “Cerulli research says the top 10 IBDs have a huge chunk of the independent industry — 85% of assets under administration. We are in the top six … and can invest more for growth and serving clients. We are the ‘scale players’ and are well positioned in the fiduciary era. And the best is yet to come.”
How about the RIA route for advisors?
“We have an RIA at each of our [member] firms, and about half of our business is in the RIA side of the equation. We are a firm believer in the hybrid models and in both models,” he said.
“We do not believe the best way is to drop Finra registration and go all RIA,” Price added. “Sometimes the commission option makes sense for clients, with products like bond ladders. It all starts with the client.”
