Yield of Dreams

Another Private Equity Investment in Independent Space

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First Allied, an independent broker/dealer owned by private equity firm Lovell Minnick Partners, has announced plans to acquire investment advisory firm The Legend Group from Waddell & Reed Financial.

Legend, based in Palm Beach Gardens, Fla., specializes in providing financial advice to 403(b) retirement plans. Waddell & Reed announced the sale in its third quarter earnings yesterday.

“Managing a separate broker/dealer whose principal business, the 403(b) market is changing rapidly has proven to be a challenge,” said Hank Herrmann, CEO of Waddell & Reed, on a conference call.Therefore, this transition allows us to continue and blast our efforts to sell our product through Legend, in its new partner, First Allied, with that responsibility in diversion of managing this broker/dealer business, which for us is no longer a core asset.”

The deal is expected to close in January 2013. Although First Allied will allow Legend to operate as a standalone business, the combined entities will have about 1,400 advisors and $28 billion in assets under administration.

The news continues the trend of private equity firms pushing into the wealth management space over the last few years. Last year, Lovell Minnick Partners announced plans to buy a majority stake in First Allied, which was previously owned by Chicago-based Advanced Equities. Private equity powerhouse The Caryle Group purchased the largest minority stake in Houston-based Avalon Advisors last year. And in 2009, private equity firm Lightyear Capital purchased ING’s three independent broker/dealers, rebranding the network Cetera. Cetera also recently acquired Genworth’s broker/dealer.

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Casting a gimlet-eye on asset management issues.

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