An investment advisory firm has been waging a public proxy battle with executives of Blucora, the parent company of tax-centric broker/dealer Avantax Wealth Management. Ancora, which owns about 3.4% of Blucora's shares, is seeking four seats on Blucora's board of directors in an effort to invigorate what the activists say is the company's flailing advisory business.
In the latest salvos in the battle this week, Ancora sent a Q&A with its four nominees to shareholders, outlining their experience in the wealth and tax industries. Days later, Blucora sent its own letter to shareholders touting the experience of its existing board members and criticizing Ancora’s nominees.
The Blucora letter said that under the current board of directors, the firm has executed on its tax-focused strategy and that its share price has outperformed the S&P 500 by 72% over the past six months.
A spokeswoman for Ancora could not be reached for comment by press time.
Ancora has nominated to the board its CEO, Fred DiSanto; Cindy Schulze Flynn, the chief marketing and communications officer for Union Home Mortgage; Robert D. MacKinlay, CFO for Gardiner Service Company; and Kimberly Smith Spacek, a partner with Owl Creek Asset Management. In earlier letters, DiSanto has claimed Blucora's business decisions are alienating advisors, sending many fleeing to other independent broker/dealers.
Blucora argued DiSanto was the only one of the four proposed nominees with public company experience, and he would likely be “conflicted and too busy” to serve effectively. DiSanto runs his own investment advisory firm that, Blucora charges, competes with Avantax financial advisors.
Blucora also argues that the four nominees have been selected based on personal relationships, as all live in the same neighborhood outside of Cleveland, and “none appears to have technology or personal tax-preparation experience.”
“We believe Blucora and its stockholders deserve a board built on merit, experience and talent, not one based on geography or prior business relationships,” Blucora said in the letter.
But Ancora’s letter points out that MacKinlay, for instance, has served as a senior accountant at KPMG and as national managing partner at Cohen & Company, an accounting and consulting firm. Flynn said she has held executive-level communications and marketing roles at firms with wealth and tax advisory offerings, including New York Community Bancorp and Citizens Financial Group.
Blucora’s letter also criticizes the Ancora nominees for their lack of experience serving on public company boards. And while DiSanto does have public board experience, Blucora denounced the performance of those companies. For instance, Blucora said total shareholder return for Alithya Group, a management consulting company, underperformed the S&P 500 by 84% during DiSanto’s tenure on the board.
“All four public companies where Mr. DiSanto has served as a director have significantly underperformed the market during his tenure,” Blucora said.
Yet six of the 10 current Blucora directors had no public board experience prior to their appointments at Blucora.
That board consists of Chair Georganne Proctor, former CFO at TIAA-CREF; Christopher Walters, Blucora’s president and CEO; Steven Aldrich, former chief product officer at GoDaddy and former vice president of strategy and innovation at Intuit; Mary Zappone, CEO of Brace Industrial Group; John Macilwaine, CEO of Bay1 and former vice president at Braintree; and E. Carol Hayles, former CFO at CIT Group.
Over the past year, Blucora has added four new directors, including Mark Ernst, former chairman, president and CEO at H&R Block; Jana Schreuder, former executive vice president and COO at Northern Trust; Karthik Rao, chief operating officer at Nielsen; and Tina Perry, president of the Oprah Winfrey Network.
In an open letter last week to Avantax’s 3,770 advisors, Ancora argued Blucora’s current management team is failing to find promised synergies between Avantax, its strategic roll-up of tax-focused broker/dealers, including HD Vest and 1st Global, and its legacy professional tax software business, depressing the stock price. The mismanagement is also alienating Avantax's advisors, Ancora said, sending many fleeing for other broker/dealers.
“It makes no sense to have the enormous corporate overhead they have to run the two businesses,” DiSanto said in an interview with WealthManagement.com. “I do think the shareholder would be better served in selling the TaxAct business at the appropriate time. [Chris Walters] has made comments that we’re saying, ‘sell it immediately.’ We’re saying at the appropriate time. Today’s not the optimal time, but six to nine months might be.
“Take those proceeds, they can pay off their debt, and if they have cash left over, which we think they will, they can either use that to go out and make good solid acquisitions that could help Avantax or pump more money back into the business as it relates to technology, service and ideas for the advisors to help them grow their business,” DiSanto said.
If elected to the board, DiSanto said his first move would be to immediately cease and desist the $60 annual fee charged to advisors for mutual funds held directly at the fund companies versus in brokerage accounts.
He said Avantax is also charging the reps $7.50 per account to go paperless; DiSanto said he would assess that total cost to the firm and give advisors 18 months to make that transition.
He would also take a deeper dive into how the firm measures service to the advisor. He’ll also look into lowering Blucora’s overhead expenses, which he said are at $30 million.
“I think it’s an exorbitant amount of money,” he said.
DiSanto also plans to look into the process the board went through to name Walters as CEO last January. Stockholders vote on the board nominations at a shareholder meeting to be held April 21.
