Yield of Dreams

New Allied Beacon OSJ Has Big Expansion Plans

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We_Need_YouCabot Lodge Securities, a newly formed office of supervisory jurisdiction of Allied Beacon Partners, plans to open three new offices on the East Coast over the next couple months. Stephen Rooney, vice president of national sales, training and recruiting, hopes to get to 100 advisors by the end of this year, and 300 by 2014. If the growth goes according to plan, Cabot Lodge would be the largest OSJ of Allied Beacon, an IBD owned by Beacon Acquisition Partners (BAP). The OSJ currently has about 20 FAs.

The firm will start by opening a Melville, N.Y. office on April 2, followed by an office in Princeton, N.J., Boca Raton, Fla., and finally New York City.

It makes sense that the firm would want to start out in the New York-metro area, given that Rooney’s primarily going after wirehouse advisors, who are dissatisfied with their current employers and looking to go independent without the overhead costs and regulatory burdens. Cabot Lodge hopes to attract wirehouse guys pressured to get rid of smaller, lower-producing clients. “[The wirehouse firms] are mainly after high-net-worth individuals,” Rooney said.

Advisors will have a direct ownership stake in the company, based on their first five years of production. Forty-nine percent of Cabot Lodge will be advisor-owned, Rooney said.

Interestingly, while many IBDs have been backing away from alternatives because of some big blowups, Cabot Lodge is emphasizing its access to alternative products. The firm wants advisors coming out of the wirehouses to know they won’t be sacrificing access to these complicated products by going independent. The firm offers real estate syndications, tax credit programs, oil and gas programs, and publicly traded and non-traded REITs.

But Allied Beacon’s parent company has brushed up against the fallout from alternative investments in the past. In March 2010, BAP purchased Pavek Investments, which it renamed American Beacon. The company knew that some of Pavek’s reps had sold real estate deals from the now bankrupt DBSI as well as underperforming oil and gas partnerships from Ridgewood Energy, but didn’t know the extent of it. After investigating things further, they decided to shut the firm down and transfer its 90 reps to Allied Beacon. At the time, Allied Beacon President and CEO James Hintz claimed there was no transfer of interest or assets to Allied Beacon, so the liabilities should die with the corporate entity. So hopefully all their efforts nipped any problems in the bud.

I’m somewhat skeptical of Cabot Lodge because Rooney would not identify the founders of the firm, except to say that they are a group of private investors who invest in a variety of businesses. I think it’s great that they have such lofty recruiting goals, but as with any firm, advisors have to do their due diligence before jumping over.

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Casting a gimlet-eye on asset management issues.

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