BrokerDealers For Sale-Glut Makes Buyers Market

brokerdealer for sale

A glut of independent brokerdealers (IBDs) for sale is creating a buyer’s market, putting pressure on prices across the independent broker-dealer space.

While no “Black Friday Sale” signs are expected to appear (that’s right, Black Friday is a negative in the world of Wall Street), according to coverage from, coupled with a further investigation by the curators at, prices for IBDs are going lower, not higher; creating opportunities for new entrants and headaches for rumored sellers that include Cetera Financial Group.

( November 25 A glut of independent broker-dealer firms (IBDs) for sale is creating a buyer’s market for independent broker-dealers that could put pressure on the prices sellers are able to attract.

Firms for sale include Cetera Financial Group, AIG Adviser Group and Next Financial Group, which collectively represent 15 individual broker-dealers and more than 15,000 registered representatives and advisers. maintains the world’s largest directory of broker-dealers in more than three dozen countries and a robust database of those interested in buying or selling broker-dealers

“There is a higher number of potential opportunities than we have ever seen before,” said Richard Lampen, president and chief executive of Ladenburg Thalmann Financial Services, which has completed five broker-dealer acquisitions since 2007. “The $64,000 question is, how many deals are going to get done?”

“With so many potential sellers in the market, and rumors of more sellers, I’m curious to see how the market-clearing process will work,” Mr. Lampen said. “There are some willing buyers, but is there a price that’s going to work?”

Mr. Lampen said sellers are going to have a reality check when it comes to offers their properties are likely to attract. He said the industry has put behind it the outsized valuations of independent broker-dealers used in acquisitions by RCS Capital Corp., a brokerage holding company that one-time real estate mogul Nicholas Schorsch put together in a flurry of acquisitions between 2013 and 2014.

“Some sellers still think it’s 2014, and Nick Schorsch price expectations are out there,” Mr. Lampen said. “But it’s hard to imagine any one overpaying at this stage in the process.”


The largest of the firms reportedly in play is Cetera Financial Group, the network that Mr. Schorsch put together. It is made up of 10 broker-dealers with about 9,500 reps and advisers. Larry Roth, the CEO of Cetera and its parent company, RCS Capital, told advisers on a conference call recently that a half dozen companies had shown interest in the firm and that a new owner or significant private-equity investor would be in place by year-end.

The full story from is here

Industry’s Largest Firm, LPL Financial, Hit With Huge Fine

lplfinancial blog update profiles Finra hitting LPL Financial, the industry’s largest independent brokerdealer firm, with a huge fine. The firm reportedly failed to properly supervise sales of complex products, such as ETFs, variable annuities and non-traded REITs. In addition to paying a fine to Finra, LPL Financial will also have to pay a substantial amount of restitution to certain customers who purchased non-traditional ETFs, and may pay additional compensation to ETF purchasers following an additional review of its ETF systems and procedures. This update is courtesy of InvestmentNews’ article, “LPL Financial fined $11.7 million for ‘widespread supervisory failures‘”, with an excerpt from the article below.

The Financial Industry Regulatory Authority Inc. ordered LPL Financial to pay $11.7 million in fines and restitution for what it deemed “widespread supervisory failures” related to sales of complex products, according to a settlement letter released Wednesday.

From 2007 to as recently as April, LPL failed to properly supervise sales of certain investments, including certain exchange-traded funds, variable annuities and nontraded real estate investment trusts, and also failed to properly deliver more than 14 million trade confirmations to customers, according to Finra.

LPL, for example, did not have a system in place to monitor the length of time customers held securities in their accounts or to enforce limits on concentrations of those complex products in customer accounts, Finra said.

The systems that LPL had in place to review trading activity in customer accounts were plagued by “multiple deficiencies,” Finra said. The firm failed to generate proper anti-money laundering alerts, for instance, and did not deliver trade confirmations in 67,000 customer accounts, according to the settlement letter.

To continue reading about the industry’s largest independent broker-dealer firm’s huge fines from Finra, click here.

BrokerDealer Smacked With Price Gouging Penalty-Class Action Award for $850k Against Newbridge

price gouging blog update couresy Bruce Kelly of InvestmentNews from 25 February.

An independent broker-dealer, Newbridge Securities Corp., has reached an agreement to settle a class action suit costing the firm $850,000. The suit filed was filed by Newbridge clients from June 2008 to January 2013. The former clients alleged the firm price gouged clients for postage and handling on securities transactions. In addition to the class action suit, Newbridge Securities Corp., was fined $138,000 by FINRA for failing to buy and sell corporate bonds at a fair price for their customers. 

Per Investment News:

The Financial Industry Regulatory Authority Inc. fined the firm $138,000 for allegedly failing to buy and sell corporate bonds at a fair price for their customers. The firm allegedly failed to take into consideration relevant circumstances “including market conditions with respect to each bond at the time of the transaction, the expense involved and that the firm was entitled to a profit,” according to Newbridge’s BrokerCheck profile. The firm did not admit or deny the allegations as part of the settlement.

The firm lost $434,600 on $37.9 million in revenue in 2013, according to its most recent annual audited financial statement submitted to the Securities and Exchange Commission.

In May 2011, Finra CEO and chairman Richard Ketchum raised the issue of postal price gouging by broker-dealers in a speech to industry executives.

Postage and handling fees charged by broker-dealers ranged at the time from $3 or $4 to as high as $75 per transaction, executives said. Some firms had been inflating postage and handling fees after the financial crisis as a way to boost profits.

The issue of postage and handling costs has been hanging over Newbridge for four years. In April 2011, the Connecticut Banking Commissioner fined Newbridge $10,000, alleging that the firm charged a “handling fee” that was unrelated to actual transactional costs and that the firm failed to tell customers the fee included a profit to Newbridge, according to BrokerCheck. Finra in January 2013 fined Newbridge $50,000 over the same issue.

For the entire article from InvestmentNews, click here

Domo Arigato, Mr. Roboto: Cambridge to offer robo-offering in 2016 blog update courtesy of InvestmentNews’ Bruce Kelly.

Independent broker-dealer, Cambridge Investment Research Inc. announced plans to have a competitive robo-type offering that works in sync with its 3,000 advisers’ practices in 2016. It is the independent broker-dealer’s aim to incorporate an online advice platform as a tool for reps.

“It’s an opportunity for us to give advisers tools that are similar to other offerings but [which] don’t take them out of the middle of the relationship with the client,” said Amy Webber, president of Cambridge. “I don’t think it’s a threat. We have to figure out how to integrate it and we have to embrace what an investor wants from it. It’s a low cost tool for the next gen client who typically doesn’t have a lot of money” that ultimately will contain a pay-for-advice component, she said.

Some type of robo-offering will be a 2016 technology initiative at Cambridge. “I think we will have pieces of it,” Ms. Webber said. “It could be a digital partner to the planning and advice process and [include] tools we already give our advisers. Just like websites didn’t exist 20 years ago, it’s another tool we will plug into this independent model that keeps evolving.”

So-called robo-advisers, or automated wealth management platforms, appear to be gaining traction among traditional brokerage and registered investment advisers. In the fall, Commonwealth Financial Network CEO Wayne Bloom said the firm was looking at how it could develop a robo-adviser type offering that meshes with the high-end practices of its 1,700 registered reps and advisers.

Also in the fall, high-profile advisory firm Ritholtz Wealth Managementlaunched its own robo-adviser platform with the help of technology startup Upside Financial. In October, Charles Schwab Corp. said it was introducing an online advice platform for retail investors in the first quarter of this year and an online platform that advisers can use with their clients in the second quarter.

“In our space, I see them as more of a digital partner to what the adviser does,” said Ms. Webber, who made her comments in San Antonio, Texas, on Tuesday at the annual meeting of the Financial Services Institute. “Our human advisers will keep doing the great work that they do, but Cambridge has to give them some tools where they can talk to their clients who will say to them, ‘Hey, my neighbor is using a robo-adviser.’”

Children of older clients are using robo-advisers, and then they bring what the robo-adviser produces to meetings and ask advisers what to make of it, she said. “That’s where the value of the adviser comes in,” she said. Robo-advisers will be attractive to the so-called do-it-yourself investor, who first gained attention in the stock market boom of the 1990s, she said.

An internal group of advisers is looking at the issue, she said. Current robo-offerings vary. “They have financial planning tools, such as a plan and a proposal,” she said. “But, do we really want the end client trading? Is there a stop at that point that pings the adviser and asks, ‘What do you think?’”

For the original article from InvestmentNews, click here.

There’s an App for That: Investing Apps Challenge Brokerdealers blog update is courtesy of InvestmentNews’ Sarah O’Brien.

Independent brokerdealers face challenges everyday. Now with the boom of smartphones, investors are demanding investment apps for their phones. Independent brokerdealers struggle to compete because they don’t have the resources to meet these demands.

An increasingly tech-savvy investor base is challenging independent broker-dealers to meet the demand for simple technology in a way that fits into the complexities of advisers’ businesses and keeps investors’ personal information protected.

“The benchmark is being set, whether we like it or not,” said Edward O’Brien, senior vice president of technology platforms for Fidelity Institutional, during a recent InvestmentNews roundtable discussion with IBD technology leaders.

“Everyone loves the simplicity of their apps and their iPhones and everything they use every day,” Mr. O’Brien said. “We’ll be expected to somehow figure it out and sort it out for our users.”

A Spectrem study released last year showed that 23% of mass affluent investors (net worth $100,000 to $1 million) use mobile technology devices — such as smartphones and tablets — to buy and sell investments, as do 39% of millionaires ($1 million to $5 million) and 62% of ultrahigh-net-worth investors ($5 million to $25 million).

But as younger investors, who are more reliant on their mobile devices and more comfortable using technology for a multitude of tasks, begin to develop more wealth and seek out financial advisers, those percentages are expected to rise.

“The next generation spends more time on devices we haven’t even thought about yet,” said Patrick Yip, director of advisory market technology strategy for Pershing.

Security — whether regarding account access through mobile devices or for electronically stored private data — is also a major concern as technology evolves.

“Where does security fit in all of this and how do we keep privacy protected for clients?” asked Doreen Griffith, executive vice president and chief information officer at Securities America Inc.

She pointed out how frequently hacking episodes and security breaches occur at companies across all industries. According to Symantec’s 2014 Internet Security Threat Report, in 2013, there were 253 security breaches, representing a 63% annual increase and resulting in the exposure of 552 million identities.

Also, 38% of mobile users experienced mobile cybercrime in the previous 12 months, with lost or stolen devices remaining the biggest risk, according to the report.


“I think the consumer expectation of privacy is going to be changing with all of the security [breaches] that are going on,” said Ryan Reineke, chief operating officer and senior vice president of technology at Cambridge Investment Research Inc.

The IBM Security Services 2014 Cyber Security Intelligence Index showed that, among the industries monitored by the company, finance and insurance were the most targeted for hacking attempts, making up about 24% of all attempts. The study also showed that among IBM’s clients, the average company endures about 1,400 security breach attempts a month.

Additionally, security concerns come into play with IBD third-party vendors. If an IBD uses a cloud service, for instance, the company has to worry about that provider’s system getting hacked.

“How about all these security reviews that we put the vendors through?” asked Jon Patullo, managing director of technology product management at TD Ameritrade Institutional. “If we were able to standardize that, it would make it easier on all of us to integrate with them as well.”

Also important is figuring out to what degree mobile device usage should be part of an IBD’s technological focus.

“One of the things we’re struggling with is trying to strategically decide where we’re going and whether or not we’re really being mobile-focused [or] touchscreen-focused, or the next thing might be voice-focused,” said Darren Tedesco, managing principal for innovation and strategy at Commonwealth Financial Network. “Ultimately where we think it’s going is to talk … It’ll be “Trade Darren Tedesco, Roth IRA, 100 shares, at market, done.’

“When you’re dealing with that as the user experience, you’re dealing with the interface,” Mr. Tedesco said.

For the full article from InvestmentNews, click here.