When Jamie Price took over as CEO of Advisor Group in late 2016, it had four broker-dealers with nearly 5,000 financial advisors and $160 billion in client assets. Advisor Group, which was acquired by private equity manager Reverence Capital in 2019, now consists of eight broker-dealers with more than 10,000 financial advisors and more than $4.2 billion in annual revenue.
Price now needs to squeeze that operation under one broker-dealer roof and brand. It’s a tough job. Advisor Group said this spring it will consolidate eight of its affiliated broker-dealers under a single, yet-to-be-announced brand, a process that will take up to two years. Financial advisers will be relieved of the hassle of recalculating accounts, which means their clients won’t suffer, Price said in a recent interview.
“It’s the end of an era for some of these broker-dealers,” said Jody Papik, president of Cross-Search, a recruiting firm. “Change is difficult, and this is a significant change. The counselors will have feelings about it and will appreciate it.”
Investment News: Advisor Group announced its rebranding and consolidation of eight broker-dealers in April. What’s next?
Jamie Ginn. I think we will be ready with the new brand in July. It might be a little sooner. And we will have more about the order in the next 30 days.
IN: How have financial advisors responded?
JP: Our first top producer meeting was a few weeks ago with the consultants from FSC Securities Corp. and I didn’t know what to expect. But the response was extremely positive. The fact is that advisors now work with a single broker-dealer organization and benefit from the full scale of the firm. That means taking advantage of both the wider community and the opportunity to buy or sell consultant practices within the wider company.
IN: We reported that the rebranded firm would be called One Advisor Group. But it won’t happen. What happened there?
JP: Interesting that you focused on that. That was the internal working title of going to one brand. It was never intended as a branded brand name, although my wife liked “One AG” as a brand name. We are looking to start the next chapter of our company and the wealth management industry is changing rapidly and we wanted to try to set a new course. The name Advisor Group is a thing of the past.
IN: What kind of cost savings are you making?u: wait from consolidation.
JP: I wouldn’t put numbers yet, and we’re walking through efficiency now. But, for example, we will no longer have to audit nine companies, so our third-party audit costs will naturally decrease. There are things like that, but that wasn’t the rationale. We’re already a shared services organization, which means we already have just one CFO, not nine.
IN: The company has stated that this process of establishing a single broker-dealer will take 18 to 24 months. Can we expect an initial public offering after that, say in the summer of 2025?
JP: At the board level, we have not yet had a conversation about an IPO or liquidity. We probably could have done an IPO today based on our size, but we’re a little sidetracked by the rebranding and One Advisor Group. But we will eventually have a liquidity event. There is no doubt about it.
IN: What is the process of recruiting financial advisors as you go through this process?
JP: We have enhanced our recruitment capabilities. We hired Kristen Kimmel from RBC Wealth Management about a year and a half ago to lead recruiting and business development. We’ve also replaced more than half of the recruiters. We had record additions last year and in the first quarter of this year compared to last year.
IN: Can you share some numbers there?
JP: Last year, we added nearly $21 billion in aggregated financial advisor assets as well as two acquisitions, American Portfolios Financial Services and Infinex Financial Holdings. That’s about $66 billion in assets. With normalized attrition, we would lose 3% to 4% of our revenue in a given year. I don’t think the recent advisor departures have anything to do with the rebranding and the One Advisor Group decision.
IN: A self-starting broker-dealer, such as LPL Financial, creates another way for the company to generate revenue. Your broker-dealers primarily use Pershing to clear. Are there any plans to have a self-clearing platform for joint broker-dealers?
JP: There are two reasons for going to self-cleaning. One, as you mentioned, is economics, and the other is controlling the entire ecosystem of the firm from behind. We review it every year, but we believe the economics of clearing will change in the future based on Reg BI and the securities and exchange market. So the economics of self-cleaning in the future is questionable.