Blucora’s $580 million acquisition of HD Vest Financial Services promises to open up new opportunities for tax professionals who work with the brokerage.
On Wednesday, Blucora, Inc. announced that it has signed a definitive agreement under which it will acquire the parent company of HD Vest Financial Services, an independent broker-dealer that provides wealth management and advisory services for tax professionals (see
Under the terms of the agreement HD Vest will remain a stand-alone entity under its current brand, executive leadership team and operating platform. HD Vest has an independent network of over 4,500 tax and non-tax financial professionals, who manage over $36 billion in client assets and provide investment planning solutions for individuals, families and institutions. Tax professionals who have affiliated with HD Vest will continue to operate as independent advisors without any interruption or change.
“Nothing changes for them,” HD Vest president and CEO Roger Ochs told Accounting Today in an interview Wednesday. “We’re going to continue to help our tax professionals deliver high-quality financial advice to their clients. Regardless of the ownership structure we’ll continue to do what we’ve done for the last 30 years. We’re not changing the brand, we’re not changing the service model, and the leadership team is staying in place.”
However, he does see some advantages for his company in transitioning from a privately held business, which it has been for the past four years ever since a trio of investment firms bought HD Vest from Wells Fargo, and becoming a public company once again as part of Blucora, a company formerly known as InfoSpace.
“Moving into the public domain in a public company does provide us with longer-term capital that we can use to reinvest in the company, and from the advisors’ perspective they can now buy the stock,” said Ochs. “Before, as a privately held company, they couldn’t do that. From my perspective it really puts us in the right spot where we can continue to make investments in the company, but we’re still an independent company. We’re not some huge conglomerate, but one of two businesses that will end up in the Blucora family.”
Ochs foresees a role for TaxAct in HD Vest’s business. TaxAct is mostly popular in the consumer space, where it is typically offered as free software, but Ochs noted there is a version for tax professionals with 19,600 subscribers.
“I guess the bigger opportunity is the fact that TaxAct has 5.5 million customers today,” he added. “Part of the rationale for them to partner with HD Vest is to unlock the value of those 5.5 million customers. If you’re offering free online tax returns, it’s hard to make it up in volume. There’s got to be other ways you can generate additional revenue and provide a service to clients.”
Ochs pointed out that HD Vest’s business is built on the relationship that tax professionals have with their clients. “It starts with the tax return itself,” he said. “We teach our advisors how to upload data into a repository we call the 1040 Analyst and identify financial planning ideas, whether it’s helping them retire with financial dignity, making sure they have the right investments put away to fund their children’s education or maybe the right insurance in place. We can do that by starting with the tax return and then ultimately going through a financial planning process, and then in the end manage the assets to help them get there.”
HD Vest calls this the “V4 Client Experience.”
“If you have 5.5 million tax clients why couldn’t we provide a similar service to those clients who are in need?” Ochs asked. “Of those 5.5 million, a lot of them are going to be Millennials, because they’re going to be do-it-yourselfers, so they may or may not need a financial advisor today. But as they get older and they get married and have kids, or they buy a house, they are going to start thinking about retirement planning, or they’re going to start thinking about putting their kids through school, or they’re going to start thinking about insurance to protect against some catastrophic event. Maybe they can do some of that stuff online or maybe they need the help of a professional advisor. We could help those Millennials.”
He pointed out that TaxAct also has 450,000 clients who have more than $100,000 in adjusted gross income. “Even though they’re do-it-yourselfers, these folks with more than $100,000 in AGI probably have financial problems and/or opportunities for us to help them with, and a smaller subset of 28,000 have more than $250,000 in AGI,” said Ochs. “More than likely, they have assets at that level. They might have Schedule B income or Schedule C income. They might be small business owners, etc., and it would be a great opportunity for TaxAct to partner with an HD Vest advisor to deliver incremental value to those clients and ultimately to our shareholders. That’s a way we could partner, and an advisor could choose whether or not they want to participate. That will be up to them.”
The details are still being worked out, but Ochs expects that HD Vest will begin leveraging such opportunities next year after tax season.
“2016 will be a lot of piloting, a lot of testing, to evaluate what works and get everybody on board,” he said. “Probably after tax season will be a better opportunity for us to do some follow-up work and then really gear up for tax season. It will take a little bit of time to map that out, but it’s been in my mind for a long time that you could provide the same level of service and support to those do-it-yourselfers that we do today for our tax preparer market.”
In the meantime, Ochs plans to focus on convincing more tax professionals to partner with his company and add financial services to their existing tax practice.
“We’re going to continue to focus on helping our advisors,” said Ochs. “That’s our core business. That doesn’t change. What we do with TaxAct will be incremental to the organization. We think it will help recruiting. If there are advisors out there, maybe with another firm, for example, or they’re just new to the business and trying to build their investment business, we could effectively deliver high-quality prospective clients to them through TaxAct relationships. Why wouldn’t that be an effective recruiting tool? Why wouldn’t you want to be with our firm? Because we’re not going to be doing it with anybody else, and they’re not going to be doing it with anybody else. To be part of the family would put you in a position where you could really build your business. So we’ll see where that goes, but the opportunities are really endless.”
