B. Riley Financial Provides Update on Wealth Management Business

Rhea-AI Summary

B. Riley Financial (NASDAQ: RILY) has announced an agreement to sell part of its traditional (W-2) Wealth Management business to Stifel Financial Corp. (NYSE: SF) for an estimated $27-35 million in cash. The deal involves the transition of 40-50 advisors managing approximately $3.5-4.5 billion in assets to Stifel in early 2025. The transaction excludes B. Riley's 190 independent advisors and 90 tax professionals. The company cites disruption to its Wealth Management business due to competitors capitalizing on concerns about its principal investments business as a key factor in this strategic decision.

Positive

• Expected cash proceeds of $27-35 million from the sale
• Retention of 190 independent advisors and 90 tax professionals
• Strategic refocus on core middle market financial services business

Negative

• Loss of $3.5-4.5 billion in assets under management
• Disruption in Wealth Management business acknowledged by management
• Loss of 40-50 traditional advisors to competitor

Insights

Financial Analyst

The sale of B. Riley's traditional wealth management segment to Stifel represents a strategic pivot amid business pressures. The $27-35 million deal value appears modest relative to the $3.5-4.5 billion in AUM being transferred, suggesting potential client retention concerns. The retention of 190 independent advisors and 90 tax professionals indicates B. Riley is maintaining a significant wealth management presence while streamlining operations.

The transaction helps B. Riley strengthen its balance sheet while refocusing on its core middle-market financial services. However, the Chairman's comments about "noise surrounding principal investments" impacting the wealth management business signals underlying challenges. This defensive move could help stabilize operations but also reflects competitive pressures and potential reputational concerns affecting client relationships.

Market Research Analyst

This transaction reflects broader industry consolidation trends in wealth management, where scale and technological capabilities are increasingly crucial. Stifel's acquisition aligns with its expansion strategy, while B. Riley's partial divestment suggests a strategic realignment. The deal structure, based on advisor transition success, indicates potential retention risks.

The focus on retaining independent advisors while divesting W-2 employees points to a shift in business model, potentially reducing fixed costs. However, the ~1% transaction value relative to AUM is below industry averages, suggesting either challenging market conditions or urgency in execution. This restructuring could improve operational efficiency but may impact near-term revenue streams.

Enters into Agreement with Stifel Financial Corp. to Sell a Portion of Wealth Management Business

LOS ANGELES, Nov. 1, 2024 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ: RILY) ("B. Riley" or the "Company"), a diversified financial services company, today announced that it has signed a definitive agreement to sell a portion of its traditional (W-2) Wealth Management business to Stifel Financial Corp. (NYSE: SF) ("Stifel") for estimated net consideration of $27 million to $35 million in cash. The transaction does not include B. Riley's approximately 190 independent advisors and 90 tax professionals. Subject to the terms of the agreement, the final consideration will be based on the number of advisors that join Stifel at closing. An expected 40 to 50 advisors, along with the associated customer accounts, will transition to Stifel in early 2025. The accounts represent total assets under management (AUM) of approximately $3.5 billion to $4.5 billion as of September 30^th, 2024.

Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, commented: "The past year has proved disruptive to our Wealth Management business, with competitors taking advantage of the noise surrounding our principal investments business. We decided to take a proactive approach for those who wanted a fresh start and found a well-respected partner in Stifel. The individuals leaving will be able to transfer their accounts in a point-to-point transaction, with no impact on their day-to-day responsibilities upon closure. We respect the contributions of the Advisors who are leaving and are pleased they have found a great home at Stifel."

Mr. Riley continued, "As we continue to refocus B. Riley on our core middle market financial services business, we believe there are substantial benefits and synergies to maintaining a Wealth Management business in our portfolio.  We are committed to investing in our core financial services businesses, which remain well capitalized and have the resources and market expertise to serve our clients and partners in the small- and mid-cap markets."

Details of the Transaction

The transaction has been approved by the Board of Directors of the Company and is subject to the receipt of required regulatory approvals and other customary closing conditions. It is expected to close early in the second quarter of 2025.

About B. Riley Financial

B. Riley Financial is a diversified financial services company that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. B. Riley leverages cross-platform expertise to provide clients with full service, collaborative solutions at every stage of the business life cycle. Through its affiliated subsidiaries, B. Riley provides end-to-end financial services across investment banking, institutional brokerage, private wealth and investment management, financial consulting, corporate restructuring, operations management, risk and compliance, due diligence, forensic accounting, litigation support, appraisal and valuation, auction, and liquidation services. B. Riley opportunistically invests to benefit its shareholders, and certain affiliates originate and underwrite senior secured loans for asset-rich companies. B. Riley refers to B. Riley Financial, Inc. and/or one or more of its subsidiaries or affiliates. For more information, please visit www.brileyfin.com.

Forward-Looking Statements

Statements made in this press release that are not descriptions of historical facts are forward-looking statements that are based on management's current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition, and stock price could be materially negatively affected. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of today's date. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company's performance or achievements to be materially different from any expected future results, performance, or achievements. Forward-looking statements speak only as of the date they are made and the Company assumes no duty to update forward-looking statements, except as required by law. Actual future results, performance or achievements may differ materially from historical results or those anticipated depending on a variety of factors, some of which are beyond the control of the Company, including, but not limited to, the risks described from time to time in the Company's periodic filings with the SEC, including, without limitation, the risks described in the Company's 2023 Annual Report on Form 10-K and in B. Riley Financial's Quarterly Reports on Form 10-Q for the period ended March 31, 2024 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (as applicable). These factors should be considered carefully, and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and the Company undertakes no duty to update this information.

Contacts

Investors
ir@brileyfin.com

Media
press@brileyfin.com 

 

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SOURCE B. Riley Financial

FAQ

How much is Stifel paying for B. Riley's (RILY) Wealth Management business segment?

Stifel is paying an estimated $27-35 million in cash, with final consideration based on the number of advisors joining Stifel at closing.

What assets under management (AUM) will transfer from B. Riley (RILY) to Stifel?

Approximately $3.5-4.5 billion in assets under management will transfer to Stifel, as of September 30th, 2024.

When is B. Riley's (RILY) wealth management business sale expected to close?

The transaction is expected to close early in the second quarter of 2025, subject to regulatory approvals and customary closing conditions.

How many advisors will B. Riley (RILY) retain after the Stifel transaction?

B. Riley will retain approximately 190 independent advisors and 90 tax professionals, as they are not included in the Stifel transaction.