Avantax boosts forgivable loans to advisers

It's an indication the firm is carrying through on its strategy to attract experienced financial advisers who generate more revenue.

Putting its money where its mouth is, Avantax Investment Services Inc. substantially boosted its spending on recruiting experienced financial advisers in 2021, reporting to the Securities and Exchange Commission at the start of the month that it had issued $22 million in outstanding forgivable loans, an important recruiting tool in the fight for financial advisers.

That figure is almost seven times greater than the amount the firm cited a year earlier, when Avantax reported just $3 million in such loans and accounted for them as part of the line for “other assets” in audited financial statements filed annually with the SEC. The loans run for five to 10 years, according to the filing, which is called a Focus report.

Of course, Avantax’s spending on forgivable loans is nowhere near that of behemoth competitors like LPL Financial, which in February reported to the SEC that it had forgivable loans of close to $773 million as of the end of last year, compared to $419 million a year earlier, a jump of 84%.

But it’s an indication that Avantax is carrying through on its strategy to attract experienced financial advisers who generate more revenue. Blucora Inc., the parent company of Avantax, said last month that the firm reported 2½ times more recruited assets in 2021, at $929 million, compared to $363 million in 2020.

“We recruited a record number of assets to the platform in 2021 and also issued loans to some of our existing financial professionals to continue growing their businesses,” a company spokesperson wrote in an email.

Avantax is making this shift in a highly competitive market for recruiting experienced financial advisers and brokers who run profitable practices.

“Over the last 24 months, a key strategic imperative has been to shift our business development focus to attract more established financial professionals with higher expected long-term retention,” Marc Mehlman, Blucora’s chief financial officer, said during a conference call last month with analysts to discuss earnings.

Avantax last month reported 3,416 advisers or “financial professionals,” as the firm calls them, at the end of 2021, compared to 3,770 at the end of 2020. That was a year-over-year drop in head count of 354 advisers or 9.4%.