B. Riley Financial Inc. is considering selling various businesses, including its wealth management group with several hundred financial advisors, in order to raise capital to pay part of its $2 billion in debt that is hanging over the investment bank as it grapples with the fallout from its investment last year in the Franchise Group.
According to a report from Reuters, Stifel Financial Corp., which has experience in making deals to acquire struggling financial services firms, is in talks to buy B. Riley’s retail brokerage group for $100 million, with Reuter citing an anonymous source in its story.
Some in the wealth management marketplace wonder if Stifel, which has not always embraced the independent contractor brokerage model, would be a fit for B. Riley’s financial advisors. More than 500 independent financial advisors joined B. Riley after it acquired in 2022 National Holdings Corp., the parent of National Securities Corp.
Independent reps at broker-dealers are identified as such because they are paid as independent contractors, not employees, and the independent brokerage model for years has faced speculation by many because of its notoriously thin margins when compared to the healthy cash flows kicked off by registered investment advisors.
“The National financial advisors are thinking, a deal with Stifel is probably not a good fit,” said one industry executive, who spoke confidentially to InvestmentNews about Stifel’s potential interest in B. Riley’s wealth group.
Stifel bought Sterne Agee Group Inc. in 2015 only to sell its independent broker-dealer and clearing group a year later to what is now StoneX Group Inc.
“When Stifel bought Sterne Agee, they didn’t want the independent reps,” the executive said. “Would that be any different now?”
Spokespeople for both B. Riley and Stifel did not return calls Monday morning to comment.
Meanwhile, this winter Alex David left Stifel Financial, where he was president and CEO of the firm's independent advisors group, to join Raymond James Financial Services, the independent brokerage arm of Raymond James Financial Inc., as the director of its northeast division.
David's departure from Stifel Independent Advisors, which until recently was named Century Securities Associates Inc., came after Stifel Financial CEO and chairman Ron Kruszewski said the company had no immediate plans to grow the independent broker and advisor portion of the firm's business, which is substantially smaller than its employee broker and advisor group.
“With Alex David leaving Stifel, what does that say about the independent brokerage business there,” asked another senior industry executive.
B. Riley is under considerable pressure following a plunge in its share price amid an SEC assessment of whether the firm correctly disclosed risks in some of its assets, and questions about its founder’s interactions with Brian Kahn, the former chief executive of Franchise Group Inc, who stepped down in January after Riley’s leveraged buyout of the firm.
Last month, chair and co-CEO Bryant Riley informed the board of directors of his intention to take the company he founded private, with a proposed purchase price of $7.00 per share. He is currently the firm’s largest shareholder with a 24% stake.
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