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Wells Fargo earnings point to a tough 2020

15:33 15 April in In the News by rafferty

April 14, 2020 By Bruce Kelly, Investment News First-quarter performance shows weakness across the board in the bank's wealth management business Wells Fargo & Co.’s first quarter earnings, released Tuesday morning, showed weakness across the board in its wealth and investment management group, which includes Wells Fargo Advisors, with drops in total assets, advisory assets and net interest income when compared to the same quarter in 2019. Such declines have been widely expected, as the giant brokerage with 13,450 registered reps and financial advisers, along with the rest of the wealth management industry, comes to terms with the impact of the first quarter’s sharp decline in stocks as the broad economy grapples with effects of COVID-19. The Dow early Tuesday afternoon was trading close to 24,000, up 2.4% for the day. For 2020, the Dow...

Financial Advisor IQ a Financial Times Service

Be Careful of Leveraged B-Ds Like Cetera, Advisor Group: Recruiters

16:56 07 April in In the News by rafferty

April 7, 2020 By Mrinalini Krishna, Financial Advisor IQ Moody’s has sounded the alarm about the impact of the coronavirus pandemic on the financial health of certain broker-dealers, such as Advisor Group and Cetera Financial. Recruiters are cautioning FAs about these leveraged firms because their spending ability to support the growth of advisors may be limited. Both Cetera’s 2018 acquisition by PE firm Genstar Capital and Advisor Group’s 2019 buyout by PE firm Reverence Capital were financed through junk bonds. According to a Moody’s report in June 2019, as a part of the Reverence Capital deal, Advisor Group planned to raise $1.6 billion in debt through a series of debt offerings that were rated below investment grade. Similarly in August 2018 Moody’s noted that for the Genstar deal, Aretec planned to raise $1.015 billion...

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Private equity owners of IBDs will be tested during the downturn

15:39 06 April in In the News by rafferty

April 3, 2020 By Bruce Kelly, Investment News How will they hold up as they deal with the fallout from COVID-19? Private equity investors have been major players in the independent broker-dealer industry since 2005, when two top-tier managers, Hellman & Friedman and Texas & Pacific Group, now TPG, bought 60% of LPL Financial. Five years later, they took the company public at $30 per share. The initial public offering was an unqualified success, with LPL shares flirting with $100 per share this year before the COVID-19 pandemic sparked a market sell-off. Other private equity managers obviously took notice, as they’ve been snatching up registered investment advisers for the past 0 years. Although broker-dealers are larger than RIAs when it comes to assets, B-Ds are less profitable, with margins in the single digits, compared with margins of 20% to 30% for...