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Ameriprise Acquires $8B Indie Brokerage

Fundfire a Financial Times Service

Ameriprise Acquires $8B Indie Brokerage

17:42 26 April in In the News

April 25, 2017

By Danielle Verbringe, FundFire


Ameriprise Financial has announced plans to acquire Investment Professionals Inc. (IPI), in a deal poised to add 200 advisors and $8 billion in client assets.

IPI, a San Antonio, Texas-based independent broker-dealer which specializes in providing investment programs to banks and credit unions, will operate as a new Ameriprise advisor channel focused on serving financial institutions, according to a press release from Ameriprise.

“We see this as a new growth opportunity and another avenue for providing an outstanding client experience,” said Pat O’Connell, executive v.p. of Ameriprise Advisor Group, in an email response to questions.

Scott Barnes, chairman and founder of IPI, will serve in an advisory role with Ameriprise. Jay McAnelly, president and CEO of IPI, will also join, reporting to O’Connell.

“We’re confident IPI advisors will see a lot of value in working with Ameriprise and we expect retention will be very strong,” O’Connell says.

The transaction is expected to close in the third quarter of this year, subject to customary closing conditions and regulatory review, according to a statement from Ameriprise. The terms of the deal were not disclosed.

A spokeswoman for IPI didn’t respond to an interview request in time for publication deadline.

Greater expenses in complying with the Department of Labor (DOL) fiduciary rule coupled with declines in REIT, BDC and variable annuity revenue, has taken a toll on small and midsized independent broker-dealers, driving many to look for buyers, says Jon Henschen, president of Henschen & Associates, a recruiting firm focused on the independent broker-dealer market. Brokerages catering to bank and credit union channels, which tend to sell a lot of packaged products like variable annuities, are also facing shrinking profitability under those pressures.

“It’s kind of a double whammy of greater expenses and less revenue,” Henschen says. “If you don’t have a decent amount of scale you have a tough time surviving.”

For firms with a history of regulatory and compliance troubles, that can be particularly challenging, he says.

In February 2017, the Financial Industry Regulatory Authority (FINRA) fined IPI $125,000 over municipal bond trading practices and supervisory failures. A month later IPI agreed to a separate $100,000 fine to settle charges with the Commonwealth of Massachusetts over aggressive sales practices and unsuitable recommendations of CDs, REITs and BDCs. In July 2016, FINRA censured and fined the firm $170,000 over failure to supervise nine registered reps who were dually registered with unaffiliated RIAs. IPI also faced past fines from state regulators in Florida and Ohio in 2016. Those issues followed earlier regulatory run-ins between 2005 and 2015.

“As with any acquisition, we take compliance very seriously and will be focused on supplementing their systems with our strong compliance infrastructure going forward,” wrote Ameriprise’s O’Connell in an email response to questions.

This isn’t the first time Ameriprise has turned to M&A to supplement organic growth.

In 2015 Ameriprise acquired another small independent brokerage, JHS Capital Advisors in 2015, as reported. When announced in April 2015, that deal was expected to add about 150 advisors and $4.1 billion in client assets. Ameriprise also bought H&R Block Advisors in 2008.

Ameriprise continues to look for “the right kind of opportunities,” O’Connell says

“We don’t speculate on future plans, but we’ve always said we’re looking for opportunities to supplement our organic growth with the right kind of acquisitions,” he says.

Ameriprise had 7,668 independent advisors and 2,007 employee advisors in the fourth quarter of 2016, according to the firm’s earnings report. Both of those numbers were down year-over-year. Ameriprise advisors oversaw $479 billion in client assets as of the end of 2016. Approximately $201 billion of that was in advisor wrap accounts.

While uncertainty about the fate of the fiduciary rule under the new administration has caused some slow down in M&A and recruiting in the independent broker-dealer space, the high pressure environment continues to spur sellers, says Henschen, the recruiter. This creates a more favorable environment for acquirers to get a good deal.

“The prices being paid [have] come down,” Henschen says. “The crazy days when [RCS Capital’s Nicholas Schorsch was paying 100% of trailing revenue are long gone… I hear this from broker-dealer owners, they’re just not getting offered what they had hoped.”