1st Global president prepares for HD Vest, Blucora deal

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David Knoch, the president of 1st Global, is getting ready for the close of the acquisition of his financial advisory firm by Blucora, the parent company of HD Vest, and is making plans for aligning with a former rival.

Last month, Blucora announced it was acquiring 1st Global for $180 million in stock (see HD Vest parent Blucora to acquire 1st Global for $180M). 1st Global is a tax-focused wealth management firm and, like HD Vest, it often partners with CPA firms, encouraging them to offer financial planning services to clients. Blucora intends to combine HD Vest’s individual tax advisor focus with 1st Global’s institutional, multi-partner focus.

“By joining Blucora, our advisors and employees are going to be further empowered to make people's lives better,” Knoch told Accounting Today. “That's exciting for us. Both 1st Global and Blucora are super passionate about helping tax-focused financial advisors enrich their communities and the people who live in them. We've got that in common. It just makes sense to join forces in advancing toward that noble outcome. We're pretty excited to bring together the knowledge, resources and capabilities of both companies. We're going to be able to serve more clients and serve all clients better and more completely as a result of this.”

The deal is currently going through the regulatory approval process, so Knoch couldn’t comment at length about it, but he does see ways to align the two firms. “Both Blucora and 1st Global have served the tax-centric market,” said Knoch. “We have historically specialized in different areas of the market: individual tax professionals for HD Vest and larger multipartner CPA firms for us. But together we're stronger. We have greater scale, new opportunities for leveraging efficiencies, capabilities and technology and even more to serve our advisors and their clients.”

For now, Blucora is likely to retain the 1st Global brand. Blucora also owns TaxAct, the tax preparation software provider acquired in 2012 by Blucora’s predecessor company, InfoSpace. Knoch sees opportunities for the combined company to leverage the need for tax advice in the wake of the Tax Cuts and Jobs Act.

“Right now is the biggest bull market in tax-focused financial advice in a generation,” he said. “The new tax law seems to be driving more conversations between American families and their CPAs, particularly CPA financial advisors. In a survey of our advisors’ clients this past year, we saw fiduciary language show up in those survey responses, which really gave us the sense that fiduciary customer expectations would show up in a way that benefited our CPA financial advisors more so than any other.”

He sees more tax clients coming to their accountants for advice about the new tax law, recognizing that CPAs have a fiduciary responsibility to act in their clients’ best interest. “More than anything else what we're seeing is the clients of the CPA firms are out of ‘status quo’ mode, meaning even if their tax situation is better, they're not necessarily in a position to know that until they sit down with their CPA and really ask questions about what the change in the tax law means to them,” said Knoch.

1st Global is trying to leverage new technology to help accountants and their clients. Last month, it announced it had expanded a partnership with the wealth management technology provider Envestnet to launch a new Vision data management system that leverages artificial intelligence and data analytics to provide insights into financial advisors’ businesses.

“We've continued to enhance and modernize our technology,” said Knoch. “We’ve invested heavily in our integration layer, which is something that allows us to be very nimble with the technology. It allows us to rapidly integrate third-party technologies with our systems. Think of a hub and spoke system. This technology is the hub. Historically speaking, firms like ours do not invest in this, and as a result technology rollouts are slower, so we are excited about being able to leverage that. For example, we've expanded our partnership with Envestnet. The biggest relationship we have with them is as our portfolio accounting system for our managed account platform, but we were their launch partner for their new Vision product, which will aggregate together all of a financial advisors’ clients assets, no matter where those assets are held.”

1st Global also recently launched MyRepChat texting software, which advisors can use for communicating with their clients.

“After being launch partner for Redtail Speak, which is a compliance-approved way of allowing financial advisors to communicate with their clients using text messaging, we continue to modernize and improve our customer and advisor interactions by partnering with MyRepChat, which is another compliance-approved text-messaging service,” said Knoch. “This one adds integrations and capabilities, including the ability to preschedule text messages, for example. This technology integrates well with Redtail’s core CRM product. There are a lot of advantages to this platform, so we're pretty excited to make sure that despite regulatory expectations and challenges, we don't hold our financial advisors back from being able to communicate well with their clients.

That technology fits into an agreement with Broadridge to overhaul 1st Global’s advisor compensation systems. “We’ve signed an agreement with Broadridge to roll out their Broadridge advisor compensation platform,” said Knoch.

1st Global plans to improve the reporting it provides to its financial advisors through similar technology partnerships. “We have CPA partners to deal with and financial advisors and different referral sources, but oftentimes that can become more complex,” said Knoch. “Building or partnering with a provider will allow us to enable better processing and reporting. More real-time updating for our financial advisors is important. All of our advisor compensation will be consolidated into a single system. Today we're using multiple systems to process their compensation, so they'll get faster, better reporting. There will be a new advisor-facing dashboard, and it will have much more transparency on how compensation is split or shared across the firm. We're really excited for that partnership as well. Then, finally on the product and solution side, we're enhancing our industry-leading home office model portfolios, our investment advisory platform. Throughout the rest of this year, we're going to be making some more announcements.”

1st Global recently hired some industry veterans to leverage their expertise. Laurie Stack will lead the enterprise initiatives effort. She has worked for other advisory firms like Cetera and LPL Financial and will focus on initiatives such as improving the financial advisor experience and building succession planning support services. 1st Global has also focused on retooling its recruiting efforts over the past year, hiring Jeremy Belfiore, an industry recruiter who added two senior-level recruiters, Shaun Rose and Bruce Pullen, to his team.

Knoch sees opportunity for expanding the potential market for financial advisors who work with 1st Global and soon with Blucora and HD Vest. “Socially responsible investing is becoming more in demand from clients,” said Knoch. “You know, 85 percent of millennials are interested in socially responsible impact investing. That's something that we want to be able to deliver to our CPA wealth management providers. In partnership with Dimensional Fund Advisors, we're going to be delivering a home office centralized, built by 1st Global, model portfolio that our financial advisors can use with clients who have an interest in socially responsible impact investing. We plan on delivering that in the third quarter of 2019. Additionally we're working with Envestnet to use their Insurance Exchange solution. We'll be one of Envestnet’s first clients to use the platform. This will enable our financial advisors to deliver variable annuities to clients. Our plan is to launch that by the end of 2019. There’s a lot going on here at 1st Global.”

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Financial planning Tax planning 1st Global Avantax Wealth Management Blucora