The current economic weather in the US is seeing the regrouping of many wealth management institutions. This week, another one of the independent broker-dealer businesses in the country completed the process of being acquired by Lincoln Wealth. This brings in 1,400 professional financial advisors and $115 billion in assets into Osaic Inc.
The transaction involved Lincoln Financial Advisors Corporation and Lincoln Financial Securities Corporation, which used to be part of the Lincoln National Corporation. The two corporations—Lincoln National and Osaic Inc. share a long history together as partners in business. Lincoln National is a Fortune 200 holding company going back to 1968. Based out of Radnor, Pennsylvania, the company struggled through periods of financial stress in 2009, when it restructured as a bank holding company in order to qualify for the government’s Troubled Asset Relief Program (TARP).
After divesting to Osaic Inc., Lincoln will retain its position over its wholesale distribution franchise, Lincoln Financial Distributors. According to reports, Osaic will even help Lincoln supplement its distribution relationship with the company’s own network of advisors. According to Lincoln National, its financial distribution service is a crucial element of its growth across several different retail product lines. In an official statement, the Chairman, President, and CEO of Lincoln Financial Group reassured that the company is still committed to “continuing to execute on its enterprise strategic pillars, leverage core strengths to grow individual insurance solutions and workplace solutions businesses and deliver long-term value to all stakeholders”.
There will of course be a period within which both Lincoln Financial Advisors and Lincoln Financial Securities will operate as single entities, after which they will start the merging process into Osaic. Osaic Inc.’s history is much more recent than Lincoln’s, having been formed as recently as 2016. Belonging to Reverence Capital Partners’ portfolio, Osaic holds its own portfolio of different subsidiaries. Consisting of over 11,000 financial professionals, Osaic Inc. also manages well over $515 billion in assets.
In completing the transaction with Lincoln National, Jamie Price, the President and Chief Executive Officer of Osaic, spoke with warm regard for its long-time partner: “The addition of the Lincoln Wealth team expands the Osaic national network of seasoned and specialised financial professionals. They are highly regarded as some of the most holistic planning-focused professionals in the wealth management industry. We are truly honoured they chose to join Osaic.”
Despite these reassurances from both parties, not everyone is happy with the merger/acquisition. For RFS Financial Securities, it was the push that the team needed to leave Lincoln for LPL Financial, an independent broker-dealer in the US. This push came in the form of a realisation that the sale to Osaic meant that the Texas team would be bearing the weight of switching their broker/dealer business model. According to President and Managing Director of RFS David Miller, the opportunity to invest in tech products made LPL Financial the most attractive option for them, given the circumstances. RFS Financial is not alone in the switch: Wisconsin-based Equity Design Group also joined LPL Financial. Equity Design Group cited the frequent switch of ownership that its team had undergone as a reason for its decision to shift. For Equity Design Group, Osaic’s acquisition also added a “significant layer of confusion” for its clients.
These holding companies aren’t the only players in the market that have concerns about the current quick-sales attitude among registered investment advisor (RIA) firms. Osaic’s CEO Jamie Price himself has gone on record expressing his doubts on the valuations that most RIAs seem to publish during these transactions, as well as the frequency with which RIAs seemed to change hands in the market. At an interview at the Financial Service Institute’s annual meeting earlier this year, he said: “I think there’s going to be a day of reckoning in the RIA space. Will there be more RIAs for sale than there are buyers at the trough?”
According to sentiments shared by attendees at the meeting, many other broker-dealers and RIA aggregators on the market are actively looking to take over smaller RIAs that manage around $100 million worth of assets and face growth challenges. More and more smaller RIAs are also looking for the help, as well as the hike in value that being acquired would give them.
(Theruni Liyanage)