As independent broker-dealers seek flexible services, the largest tax-focused firm is betting big on a new RIA employee channel.
Blucora — the parent of
The accounting partners enabled Iowa-based HK Financial to generate $31 million in revenue for the 12 months ending Sept. 30 through “well-coordinated” referrals to the firm for advisory, brokerage and employer-plan services, Blucora CEO John Clendening
Acquiring HK Financial will give CPA firms a different way to branch into wealth management under Blucora by joining the advisor referral program. IBDs are ramping up services beyond traditional business models through
Blucora, which also owns tax software TaxAct,
“The simple implication is we ought to close more business by offering tax professionals and CPAs more options to better serve their tax client base while transforming the value of their practice. And, there is so much opportunity ahead of us,” Clendening said.
“Given the fundamental differences in business models, and preferences of tax professionals as described earlier, HK Financial Services will be run as a third division of Blucora, with very little integration and no overlap, eliminating risk of disruption to the Avantax advisors,” he added.
It wasn’t immediately clear how many advisors would switch their BD from ProEquities to Avantax as a result of the deal. HK Financial's current preferred custodian is Charles Schwab, while Avantax uses Fidelity Clearing & Custody Solutions' National Financial Services. HK Financial already uses Fidelity as its primary custodian for retirement plan assets, its latest SEC Form ADV brochure
Representatives for Blucora and Fidelity didn’t respond to requests for comment on the timing of any potential BD or custody switch. A spokeswoman for Schwab declined comment.
"ProEquities has enjoyed a wonderful partnership with HK Financial for the last 20 years, and we are proud of the role we have played in supporting their success over this time," spokesman Michael Dugan said in an emailed statement.
HK Financial receives about 65% of its referred wealth management revenue from the CPA partner firms participating in the program, according to Blucora. The 401(k) administration will bring the acquiring firm more business, while the seller can take in more revenue by bringing about $250 million in brokerage assets onto Blucora’s platform.
“Blucora embodies our mission to take a holistic approach to serving our clients’ wealth management needs, and is the ideal partner for HKFS,” President Louie Rosalez said in a statement. The firm services 4,100 advisory clients and 11,000 retirement-plan participants.
Clendening has said Blucora expects its wealth management
The purchase price represents a multiple of 9.3x to expected EBITDA this year from folding in HK Financial into Blucora, financed through a term loan add-on of $165 million to Blucora’s existing debt. The acquiring firm