A key provision of Advisor Group’s acquisition of Ladenburg Thalmann was likely designed to keep potentially disgruntled advisors loyal after the merger, according to experts.

Now that Advisor Group has inked a $1.3 billion deal to acquire some 4,500 advisors from Ladenburg Thalmann, the next step will be keeping as many as possible within its network.

Industry recruiters point to provisions of the deal, including preserving existing brand names and the promise not to force Ladenburg Thalman FAs to immediately move client records to Advisor Group systems, as signs the buyer was careful to keep potentially disgruntled advisors loyal after the merger.

“We are confident this transaction will help our advisors accelerate the growth of their businesses, while enabling them to benefit from the highly personalized service experience they have always enjoyed, under a very similar multi-custodial, multi-clearing and multi-brand structure,” Richard Lampen, Ladenburg’s chairman, president and CEO, said in a press release announcing the deal.

For the Ladenburg reps, the advantage could lie in the technology and managed account platforms the Advisor Group brings to the table, including eQuipt, Advisor Group’s digital client onboarding system; MyCMO, a personalized advisor marketing platform; MySuccessionPlan.com, that offers succession planning resources; and cybersecurity solutions through the CyberGuard Program.

Such steps are critical for Advisor Group, which will represent $450 billion in assets and 11,500 advisors once the deal closes, recruiters say.

“Obviously there’s going to be aggressive recruiting calling from firms trying to attract the Ladenburg reps over,” says St. Croix, Minn.-based recruiter Jon Henschen of Henschen & Associates. “It’s going to be a bit of a feeding frenzy.”

Even with a certain amount of defection, the boosted advisor count nonetheless brings considerable scale to the new firm — propelling its ranks beyond Cetera’s 8,400 and closer to LPL Financial ’s 16,189.

Often when firms merge, cultures collide — particularly in the broker-dealer space where different companies can have vastly different cultures and procedures. The increased scale would also likely allow the new firm to self clear if it so chose, adding further revenue to the group.

Under its umbrella, the Advisor Group already has broker-dealer and advisory firms such as FSC Securities, Royal Alliance, Sagepoint Financial and Woodbury Financial. With the addition of Ladenburg, that roster will expand to also include Securities America, Triad Advisors, Investacorp, KMS Financial Services and Securities Service Network. Ladenburg also brings to the table an investment bank, Ladenburg Thalmann & Co. Inc.; an asset management arm, Ladenburg Thalmann Asset Management Inc.; insurance brokerage Highland Capital Brokerage and trust and estate services provider Premier Trust Inc.

For advisors, one of the biggest features of the deal, according to experts, is the fact that each firm will retain its distinct branding and advisors will not need to change client accounts to other broker-deaslers, custodians or agreements.

Henschen says the provision will go a long way toward keeping FAs potentially disgruntled with the deal, since Ladenburg Thalmann reps “have a mid-sized culture with five-to-one staff-to-rep ratios. And so, they enjoy the experience that when they call in, they have their go-to people, they’re not calling in to a phone tree. And so that’s important to them. So, if they’re not going to mess with staffing or management and keep the culture as is, that’s very important, and at this point in time, they seem committed to doing that.”

Both Advisor Group and Ladenburg insist there are strong cultural similarities between the two firms, but experts say the way each approaches its advisors is significantly different.

“I think the Ladenburg Thalmann broker-dealers are very progressive in how they think about the industry for advisors in their support,” says Jeff Nash, a former LPL Financial recruiter who is now CEO of consulting firm Bridgemark Strategies, referring to Ladenburg’s multi-custodial nature. “They’ve tried to create a platform for advisors within some of their broker-dealers, where advisors could be actually using platforms like TD Ameritrade or Charles Schwab. Advisor Group broker-dealers are not as progressive as the Ladenburg Thalmann.”

Recruiters ready for the fallout

Both Nash and Henschen expect the deal to impact recruitment trends for the last quarter of this year as competitors try to poach advisors from both Advisor Group and Ladenburg broker-dealers.

“I doubt it would be as successful as, say, the Jackson National reps and NPH reps when they got bought by LPL. I think the success rate there for retention was around 60%,” says Henschen. He thinks the Advisor Group-Ladenburg deal many not see as much recruitment activity in its wake because “they’re not going to be having to repaper and they’re leaving things alone and embracing each of the cultures and not merging firms together, they’re not doing back office consolidation.”

Nash actually sees the union of the two umbrella companies working in favor of the advisors.

“You get the deeper capital reserves of Advisor Group, and if you get some of that progressive thinking [from Ladenburg] and combine the two ... It could be really interesting to see how this plays up,” says Nash.

The deal also opens advisors to services they may not have had before.

“Advisor Group reps will now have access to Ladenburg’s IPOs through their investment banking. They’re going to have access to the trust services company that Ladenburg owns, they’re are going to have access to Highland Capital, which is an insurance marketing organization — and they can get some pretty competitive pricing on fixed insurance products for the advisors. Ladenburg also has a couple of advisory platforms that are tactically managed ETFs and mutual funds … so, for reps looking for a low-cost, low-management fee advisory option, that’s good,” says Henschen.

But what happens when the honeymoon is over?

It is pretty clear from the details of the deal shared by the firms that the acquisition helps Advisor Group expand its network and scale, while it offers Ladenburg Thalmann access to technology, enterprise services and capital. But experts warn both firms must tread carefully to avoid any pitfalls.

Though not predicting what may happen in this case, Henschen says that typically in such deals all is well during what he calls the “honeymoon period.”

“I’ve seen this as a pattern elsewhere. They have a honeymoon period where they leave things alone, perhaps one to two years, and then after that honeymoon period they start tightening the thumbscrews and making changes,” says Henschen.


Another aspect to watch out for would be the strategy of Advisor Group’s private equity owner Reverence Capital, in light of the firm’s new-found scale after this deal, say experts. Would this set up the Advisor Group for an IPO instead of changing hands to another private equity owner?

“Now that they have the scale, for the private equity firm instead of flipping it, would it make sense for them to continue to build it out and go public?” asks Henschen, giving the example of LPL Financial.

LPL went public in 2010 and its IPO saw private equity owners Hellman & Friedman as well as TPG Partners offered shares for sale.

Henschen also wonders if the larger scale could be a temptation for the Advisor Group to move into self-clearing.

“When you get big like this, the temptation — because it adds about 25% to their profitability — is to go self-clearing,” says Henschen.

The firms so far have committed to using multiple clearing platforms, which is beneficial to advisors because it offers more flexibility both in terms of choice and pricing.

“Advisor Group and Ladenburg have a shared commitment to the flexibility of third-party clearing, together with maintaining a ’small firm feel’ delivered through the distinct management teams and cultures of a multi-brand network model,” Advisor Group President and CEO Jamie Price said in the press release announcing the deal.