Lincoln Investment Planning, an independent broker/dealer in Philadelphia, announced it will acquire independent broker-dealer Capital Analysts from insurance firm Western & Southern Financial Group. The move will add some 250 advisors to Lincoln, many with a strong focus on the high net worth market, said N. Mark Marr, chief financial officer of Lincoln. Terms of the deal were not disclosed.
Lincoln, not to be confused with Lincoln Financial Group, has its roots in the 403(b) and mass affluent investor space, but the Capital Analysts is part of a strategic plan to capture an edge in the high-net-worth space, Marr said. Lincoln has an aggressive growth plan, including the acquisition of Great American Advisors in 2010, which added more than 300 advisors. With the Capital Analysts acquisition, Lincoln’s overall advisor count will grow to more than 900.
Small firms in the IBD space are facing tighter margins in this environment and higher costs of compliance, and “scale is everything,” Marr said. Those pressures have prompted many IBDs to consolidate, a trend expected to continue for the next three to five years, analysts say.
The move to acquire insurance-owned broker/dealers has been a hallmark of the consolidation craze. Many of the insurance companies that bought the broker/dealers six to 10 years ago now want to wash their hands of them because it's more difficult to distribute proprietary product and the profit margins just haven't lived up to what they expected going into the deals, says Chip Roame, managing partner with Tiburon Strategic Advisors.
Jon Henschen, president of Henschen & Associates, said some insurance firms are not getting the cross-selling synergies they originally hoped for. Pacific Life sold its broker-dealers to LPL; ING sold to Lightyear; and most recently, Genworth sold off its b/d.
Matt Lynch, president and CEO of Capital Analysts, will stay on as a consultant to Lincoln. He said his firm had not been on the market, but Lincoln came shopping. Lincoln will maintain a distribution relationship with Western & Southern.
Marr expects the change to have a minimal impact on Capital Analysts advisors as both use Pershing as their clearing firm. The brokerage business of Capital Analysts will be rolled into Lincoln, but the advisory, or fee-based business, will move into a newly established RIA, which will likely keep the Capital Analysts name, Marr said.
There are no plans, however, to offer retention packages to Capital Analysts advisors, Marr added. Capital Analysts currently has a 100 percent payout structure, which will be maintained, but there won’t be room for additional packages beyond that.