First Allied To Finance Reps' Acquisitions
First Allied Securities is trying to play the long-anticipated consolidation game with a new weapon. The San Diego-based brokerage has decided to help its reps finance the acquisition of other firms with six-year loans.
Executives at First Allied declined to reveal how much they are committing to the new loan program, although sources say it is more than $10 million and could go higher if the program takes off. Mark Dransfield, CEO of First Allied, says the idea for the program came when reps mentioned their interest in acquiring other firms but needed funds to make the down payment.
Dransfield then contacted David Grau, CEO of FP Transitions, a Portland, Ore., firm specializing in putting buyers and sellers together. Grau confirmed that coming up with the money for the down payment was the "biggest obstacle" hamstringing the transfer of many firms in the business.
"What brought us to this is that many firms in the business have grown through acquisition," Dransfield says. "The challenge [with acquisitions] is how many advisors will stay with you? Some acquisitions have blown up with problems like integrating back offices. What you want is a willing seller who wants to do the transaction."
To facilitate deals, First Allied has partnered with FP Transitions to obtain a range of acquisition tools that can help model the businesses and structure cash flows, down payments and earn-outs. FP Transitions can also provide acquisition documents and file liens to protect sellers if a transaction runs into trouble.
In a typical transaction, an acquirer will receive a promissory note from First Allied that in some cases may be forgiven if production remains satisfactory. The down payment probably will be between 20% and 30% of the estimated purchase price (which is partially dependent on future earnings). If acquiring firms can meet all the terms of the note and pay it off, they would own their acquired businesses free and clear after six years.
Some question whether a firm that can't finance a down payment is financially strong enough to enter an acquisition. Dransfield says, however, that "it's possible" that the portion of the down payment First Allied provides won't cover the full cost, and the rep may be expected to participate in the financing.
He also acknowledges that this new program could prove to be a more cost-effective way for First Allied to finance its own growth. "The cost to an acquirer of an individual book of business is less than the cost of an entire brokerage," he explains. Especially when you could lose some of the reps. First Allied's strategy locks in all parties for six years.
CFP Board Names Three New Members
A chief executive of a nonprofit organization and the manager of a private equity firm are among three new members who will be serving on the Certified Financial Planner Board of Standards next year. All three share two common traits: They possess impressive pedigrees and they do not come out of traditional financial planning backgrounds.
The board announced that the following people will serve on the board starting January 1, 2006:
Virginia M.K. Stanley, managing principal of the accounting firm REDW Business and Financial Resources LLC, in Albuquerque, N.M. Stanley is a licensed CPA and holds certifications as a CFP, a Personal Financial Specialist and a Certified Valuation Analyst.
James A. Kaitz, president and CEO of the Association of Financial Professionals, a trade organization with more than 14,000 treasury and finance industry members. He has served as legislative assistant to Rep. James Shannon, D-Mass., a member of the House Ways and Means Committee.
Winston J. Churchill, managing partner of SCP Private Equity Partners. Churchill, who obtained a masters degree in economics following his studies as a Rhodes Scholar at Oxford, is a Yale Law School graduate.
Karen P. Schaeffer, a CFP in Rockville, Md., was named the board's chair-elect for 2006, when current Chair-elect Barton C. Francis assumes his duties as chair.
"We are extremely pleased with the three individuals who have been selected for the Board of Governors," says Francis. "Each new member brings experiences and strengths that will complement our already existing Board of Governors."
Bradley Heads Merged TD Ameritrade Advisory Unit
Ameritrade has announced it will appoint TD Waterhouse executive Tom Bradley to head its independent advisory services business as part of its acquisition of TD Waterhouse.
Bradley currently fills the same role as president of TD Waterhouse Institutional Services and executive vice president of TD Waterhouse Group Inc. He has more than 20 years experience in the financial services industry.
He will replace Jim Wangsness, who has been in charge of Ameritrade's independent advisory services unit since March 2002. Wangsness remains with Ameritrade but the company currently has no comment on what his role will be upon the appointment of Bradley, Ameritrade spokeswoman Katrina Becker says. Observers were not surprised that Bradley emerged in the catbird's seat, given his extensive experience in building TD Waterhouse's advisory services business. In contrast, Ameritrade's advisory platform was only launched a few years ago and was still trying to establish a presence in the business.
The change in leadership is pending the closing of Ameritrade's purchase of TD Waterhouse, which was announced by the companies in June. Ameritrade plans to buy TD Waterhouse USA from Canada's Toronto-Dominion Bank for $2.9 billion in stock and merge the two companies into TD Ameritrade.
The deal is still scheduled to close by the end of the year, Becker says. As part of the merger, Ameritrade also announced that John Bunch, who currently serves as TD Waterhouse's executive vice president of branch distribution, will head the branch network and investment centers for TD Ameritrade.
Upon the completion of the acquisition, the Jersey City, N.J., call center operated by TD Waterhouse, will be relocated to Ameritrade's call center in Fort Worth, Texas. "Tom and John bring exceptional leadership and strategic insight to Ameritrade that complements the strength of our current management team," Joe Moglia, chief executive of Ameritrade, said in a statement.
Fidelity Upgrades Advisor CHANNEL Platform For RIAs
Fidelity Investments has introduced upgrades to its platform for registered investment advisors. The upgrades include enhanced fixed income capabilities as well as a new trustee referral program. According to Pat Jancsy, senior vice president of Fidelity's RIA Group, the improved Fidelity Advisor CHANNEL for the first time offers advisors, "access to all Fidelity trading and information through a single user interface and a single log-on."
"Fidelity's online fixed-income platform, BondTraderPro, now offers advisors direct access to more than 15,000 fixed-income securities, as well as analytical tools and online order entry. This means that advisors will not be forced to call fixed-income orders into the bond desk if they don't want to," says Jancsy.
Fidelity Trustee Referrals will help advisors simplify the process of selecting and working with trust companies to serve as corporate trustees for their high-net-worth clients' trusts. The service allows advisors to create and manage referrals from a network of ten trust companies that specialize in offering trustee services to advisors. Through these trust relationships, advisors retain the ability mange the investment of trust assets, thus enabling advisors to maintain their client relationships. The ten trust companies operate on Fidelity's brokerage platform, providing a consistent trading and account management process tailored to the independent advisor.
In order to minimize disruptions to ongoing advisor operations, Fidelity will be conducting a phased rollout of the new Fidelity Advisor CHANNEL to its approximately 2,900 existing RIA firms. "The implementation process will include documentation and training so that firms can easily transition to the new platform," says Jancsy. New Fidelity RIA customers will be put on the new platform immediately.
Additional information regarding Fidelity's services for advisors is available at http://ria.fidelity.com.