John Hancock is one of several insurers in recent years that have decided to unload their independent broker-dealer unit as competitors in the space cut in on profits.
John Hancock has sold its independent broker-dealer (IBD) unit, Signator Investors, to Advisor Group. Once the deal is completed later this year, Signator’s 1,800 wealth management advisors will double the ranks of Royal Alliance Associates’ financial professionals.
Jersey City-based Royal Alliance is one four IBDs owned by Advisor Group that employ more than 5,000 advisors supervising $190 billion in assets — a total that will be boosted by the $50 billion Signator brings to the table. Financial terms of the deal were not released, although it is reported to be a full stock-purchase agreement.
Although the deal is particularly significant in the IBD space, John Hancock’s sell-off mirrors an ongoing trend of insurers opting out of that business. As the name implies, IBD advisors work independently, but often want the back-office support provided by a larger firm to handle trades and compliance issues. By leaving the IBD sector, John Hancock is likely moving to double down on areas within the insurance and wealth management markets where it sees room for substantial growth.
Insurers Move Away from IBD Business
As a mid-sized IBD, Signator ran up against larger firms with greater resources. Watching its profit margins get squeezed, John Hancock decided it was better to sell off the unit. Likewise, Advisor Group was owned by American International Group until the insurer sold it in 2016 to Lightyear Capital and Canadian pension fund manager PSP Investments.
AIG and John Hancock aren’t the only insurers that have recently retreated from the IBD sector. Last year, Jackson National Life Insurance unloaded four of its IBDs to LPL Financial for $325 million. LPL netted 3,200 advisors in that acquisition. Insurance brokerage and consulting firm NFP made a similar move when it sold its IBD unit to Stone Point Capital, a private equity firm, two years ago.
Not too long ago, however, John Hancock and Signator were ramping up their IBD business. In 2017, Signator acquired 40 advisory practices from Transamerica Financial Advisors that gave it 800 advisors with some $25 billion in client assets. Soon after that acquisition, two former Transamerica practices with a combined asset base of $1.3 billion left Signator.
John Hancock hasn’t exited the advisory business completely. In 2017, the company’s Retirement Plan Services wing partnered with NextCapital to automate its retirement advice platform for 401(k) and IRA rollovers.
Similar Deals in the Future?
John Hancock executives did not publicly comment on the deal. A spokesperson for the insurer said only that the deal furthers its “growth priorities and will provide Signator’s firms and advisors with significant growth opportunities of their own.”Meanwhile, President and CEO of Advisor Group Jamie Price told Financial Planning he expects more insurers to put their IBD units up for sale. “The synergies around being a product manufacturer and a broker-dealer are becoming less and less important,” he said. “I do think it’s a continuing trend, and it’s going to continue over the course of the next several years.”