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Pacific Select – No Linsco Merger

Pacific Select – No Linsco Merger

00:00 01 September in In the News

by Bruce Kelly and featured in Investment News
September, 2006:

Pacific Select Group, LLC, in an internal email to its network of registered representatives and advisors last Monday, dismissed rumors of a merger with Linsco/Private Ledger Corp. which according to numerous industry insiders, had been courting broker/dealers aggressively.
But any deal involving the two may yet happen, one industry recruiter said.

“I don’t think the deal is dead,” said Jonathan Henschen, president of Henschen & Associates, a recruiting firm in Marine on St. Croix, Minn. “I think they reached a stalemate over price.”

‘On a mission’

Pacific Select’s five-sentence denial in the internal e-mail of an immediate deal with Linsco of Boston and San Diego was a clear indication of the former’s desirability and the latter’s voraciousness, observers say. In the e-mail, Pacific Select conceded that it had been approached about a sale.

“LPL is on a mission. It has an insatiable appetite for expansion,” said Larry Papike, president of Cross-Search, a Jamul, Calif., recruiting and placement firm for brokers and executives in the independent- contractor industry. “And if Pacific Life is looking to get out of the broker-dealer business, this would be a plum acquisition,” he said.

Pacific Select of Newport Beach, Calif., a business unit of Pacific Life Insurance Co., has four separate independent-contractor broker-dealers and more than 2,700 affiliated registered reps under its umbrella. With $355 million in gross revenues last year, it ranks as the fourth-largest network of broker-dealers owned by an insurance company.

Some reps, advisers and executives with two of Pacific Select’s broker-dealers–Associated Securities Corp. of Los Angeles and Mutual Service Corp. of West Palm Beach, Fla.—have been abuzz over a potential acquisition by Linsco.

The other Pacific Select broker-dealers are United Planners’ Financial Services of America in Scottsdale, Ariz., and Waterstone Financial Group of Itasca, Ill.

The largest independent-contractor broker-dealer with 6,800 affiliated reps and $1.4 billion in gross revenue last year, Linsco has been in talks with firms of late, according to industry executives and recruiters.

Last month, it acquired UVEST Financial Services Inc. of Charlotte, N.C. About 750 brokers and advisers are affiliated with UVEST, all in banks and other financial institutions.

Mr. Papike said that the advisers affiliated with the Pacific Select broker-dealers have books of business that are heavily weighted with packaged products, such as mutual finds and variable annuities.

Culture clash

Between 60% and 82% of gross-dealer concession at the Pacific Select broker-dealers comes from packaged products, he said. The advisers also do strong fee business, Mr. Papike said.

Mr. Henschen said that while a large broker-dealer such as Mutual Service may have been a good fit with Linsco, the culture at smaller broker-dealers often can scotch an acquisition. “Mixing large firms and small firms—I don’t see that company. working out too well,” he said.

Talk about a deal between Linsco and Pacific Life had been swirling for weeks before Pacific Life moved to quash such speculation last week.

“Some competitors are spreading rumors that Pacific Life has sold its broker-dealers to LPL,” according to the company’s internal email.  Although Pacific Life has been approached, it “has no agreement nor is it in active discussions with anyone, including LPL, to sell its broker-dealers,” the company said.

Pacific Life added that it “will continue to be contacted concerning its willingness to consider transactions relating to its businesses and products, including its broker-dealer.” The firm declined to comment further. Linsco, through a company spokesman, also was mum, citing a company policy to not comment on rumors of speculation.