Ameriprise Financial Inc. last week put on the block one of the most prominent independent broker-dealers in the industry, its subsidiary Securities America Inc., but no clear buyer has emerged.
Indeed, executives and recruiters in the industry wonder whether Securities America will even attract a buyer, given its recent history of legal and regulatory problems. The firm has spent almost two years fighting legal claims from the sale of more than $400 million in high-risk private placements that are in default.
Ameriprise disclosed that it is seeking a buyer for Securities America in its first-quarter-earnings filing last Monday, in which it reported a $115 million loss for the broker-dealer. A Securities America spokeswoman, Janine Wertheim, said that the firm, which has 1,800 representatives and financial advisers, and $400 million in annual revenue, would have been profitable but for its legal costs.
When it comes to finding a buyer for Securities America, speed is key, executives said. The longer Ameriprise takes to complete a deal, the more time and opportunity its brokers have to walk, they said.
Securities America has stressed that its brokers aren't leaving, despite the turmoil, but the firm already has had one high-profile defection. Last month, one of its top-producing brokers, Sue Ricker, left to join LPL Financial, the leading broker-dealer under the umbrella of LPL Investment Holdings Inc.
The financial stability of Securities America is clearly a concern, she said.
“It doesn't have a very appealing story to tell my clients,” Ms. Ricker said.
Ms. Wertheim declined to comment about Ms. Ricker's departure.
“We went through this,” said Valerie Brown, chief executive of Cetera Financial Group, a network of three broker-dealers that spun off from ING Groep NV last year. “Getting the final vision and owner identified as quickly as possible is in everyone's best interest.”
She declined to comment when asked if Cetera has any interest in buying Securities America.
Securities America's brokers are leery of letting Ameriprise decide their future by finding a buyer, said Larry Papike, president of Cross-Search, a recruiting firm that specializes in independent reps and executives from those firms.
“Brokers are saying, "I don't want Ameriprise to make decisions about my future; I want to make the decision about my future and whether to stay or go,'” Mr. Papike said.
Ameriprise spokesman Chris Reese said the firm would have no comment.
LPL, the Advisor Group and Cetera always will have the appetite and ambition to grow and likely will kick the tires at Securities America, one executive said.
“The big boys will likely take a look at it, and maybe even Ladenburg Thalmann [Financial Services],” said Joel Marks, chairman of First Allied Securities Inc. He said that his firm is actively looking to buy broker-dealers, but of a smaller size than Securities America.
Not everyone is certain that LPL will be a bidder for Securities America.
“It's just a hunch, but I think LPL probably looked at it already and took a pass,” said John Rooney, managing principal of Commonwealth Financial Network.
Michael Herley, an LPL Financial spokesman, declined to comment.
Ameriprise's decision to sell Securities America comes at a time when the independent-broker-dealer market is crowded with firms for sale.
In March, Investors Capital Holdings Ltd.'s founder and largest shareholder, Theodore E. “Ted” Charles, said that he wanted to sell his majority stake in the firm, which is home to 550 independent reps and advisers.
In its SEC filing, Ameriprise said that a sale “would allow [Securities America] to focus on growth opportunities in the independent channel and would allow Ameriprise to devote its resources to the Ameriprise-branded adviser business. The sale process will not affect management's commitment to completion of the settlement on its current terms.”
Ameriprise and Securities America are waiting for a federal court judge to approve a proposed $150 million settlement with investors in connection with the sale of the private placements issued by Medical Capital Holdings Inc. and Provident Royalties LLC.
The SEC in July 2009 charged those issuers with fraud. Dozens of independent broker-dealers sold those deals, but Securities America was by far the largest.
Ameriprise's willingness to back Securities America through its recent settlement negotiations over the sale of the private placements leaves the firm in a strong financial position to continue operations, Ms. Wertheim said.
“We believe there are many options that will afford enhanced opportunities and benefits to our advisers and employees,” she said.
E-mail Bruce Kelly at [email protected].
