December 4, 2023


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Avantax Wealth Management’s Q1 earnings and headcount fall

After the defeat of an activist shareholder and a report that its wealth manager received an acquisition offer, a midsize firm is trying to regain its footing.

The count of financial advisors at Avantax Wealth Management has fallen for two consecutive quarters and by a net 266 registered representatives since the end of 2019, according to the May 5 first-quarter earnings of its parent firm, Blucora. In an earnings call with analysts, Blucora CEO Chris Walters declined to discuss “speculation” about a private equity firm’s reported offer for the wealth manager, though he says the company is evaluating all options.

  • Wealth management results: Avantax earned income of $19.4 million on revenue of $154.5 million. Its profit fell 14{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year in the first quarter due to the impact of lower interest rates, but revenue increased 7{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. Avantax’s share of income as a percentage of revenue dropped 3 points from the year-ago period to 13{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}; after commission payouts, the percentage of income as a percentage of net revenue slipped 10 points to 41{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.
  • Financial advisor headcount: At 3,718, the number of reps is down by 6{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} from the same time a year ago. In the quarter, the company added 67 new reps, including 18 tax professionals registering for the first time, according to Walters. Out of 143 leaving the firm in the quarter, 117 had gross annual production of $50,000 or less. One of the company’s advisors reached $10 million in trailing 12-month production in the first quarter, which he called “a significant milestone.”
  • Client assets: They surged by 39{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year to $84.8 billion in the first quarter. Advisory assets soared by 56{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to $36.8 billion; at 43.4{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}, the share of assets under management as a percentage of total client assets is up 4.7 points from the year-ago period. Advisory and commission revenue per rep grew 18{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to $38,600. Avantax set a record in March for the largest gross in-flow into advisory accounts in a single month, with $2.1 billion in new AUM.
  • Remark: “Blucora’s independent financial professionals have experienced a significant amount of change over the last several years, as would be expected with clearing platform changes, integration of acquisitions and changes in the regulatory environment,” Walters said. “This has resulted in some predictable turnover, including during the first quarter, but in most cases attrition has been in line with our expectations as we continue to improve financial professional relationship management, accelerate service and operational improvements, and roll out technology-related experience enhancements throughout the year. We remain optimistic about the potential of our differentiated, tax-focused wealth management strategy.”