Advisor Group, a subsidiary of Lightyear Capital, has acquired Signator Financial from John Hancock and plans to merge it into its Royal Alliance unit. The transaction continues a trend of insurers divesting their broker-dealer operations.
It also raises questions about the balance of power in the independent broker-dealer world. Lightyear is seen as one of the leading bidders for Cetera Financial Group, which is exploring strategic alternatives including a recapitalization and possible sale.
Signator brings 1,800 brokers and $50 billion in assets under the Royal Alliance umbrella. Royal Alliance itself had 1,631 reps and $66.6 billion in assets under management at the end of 2017. The combined entity will have about 3,500 reps and $900 million in revenues, placing it among the top seven or eight IBDs.
The Signator transaction could challenge Royal Alliance's service capacity. Advisor Group executives said they were more concerned with engineering a smooth transition than they were with cutting costs.
Advisor Group CEO Jamie Price said the network saw "immediate compatibility" between Royal Alliance and Signator because both firms use a Super OSJ model. Hancock owns another BD but Signator was the one that was built around the IBD model.
Price said the acquisition was a "complete stock purchase," not an asset purchase. Though Advisor Group operates on a shared service model among its four IBDs, Price said it plans to retain more than a few of the back office personnel at Signator.
Since Royal Alliance and Signator are essentially the same size, doubling the number of reps on the platform will require more back-office capacity, said Dmitry Goldin, president and CEO of Royal Alliance.
If Lightyear remains serious about acquiring Cetera, as most informed Wall Street investment banking sources believe, they will likely need additional support personnel—and management as well. Cetera has 8,000 reps and Advisor Group will have close to the same number, depending on how many Signator reps it retains.
Indeed, many in the IBD industry were suprised by severity of the the problems LPL FInancial has encountered over the last nine months since it acquired four broker-dealers with about 3,000 reps from Jackson National's National Planning Holdings (NPH) B-D network in August 2017 and transferred them onto the LPL platform. These capacity constraints are thought to be a major reason why LPL is seen as a long-shot bidder for Cetera.
Rival IBDs turned the LPL-NPH deal into a major recruiting opportunity. Royal Alliance, for example, enjoyed a record recruiting year in 2017, adding 171 reps with $4 billion in assets.