An investment advisory firm is waging a public proxy battle with executives from Blucora, the parent company of tax-centric broker / trader Avantax.
Ancora, a $ 8.7 billion AUM investment advisory firm that owns approximately 3.4% of Blucora’s stock, is aiming for four seats on Blucora’s board of directors. The investor argues that the current management team is not finding any promised synergies between Avantax, Blucora’s strategic roll-up of tax-oriented brokers / traders, including HD Vest and 1st Global, and Blucora’s old business of professional tax software, which is driving the stock price down.
The mismanagement also alienates Avantax’s advisors, says Ancora, and sends many on the run to other brokers / traders.
in the an open letter from Ancora’s four board nominees to the 3,770 Avantax consultants Fred DiSanto, chief executive of Ancora, pointed out Wednesday that Avantax had suffered a net loss of 100 consultants year over year, citing a lack of industry experience on the management team.
“Ancora has invested a significant amount of capital in Blucora based on a simple thesis: Avantax can become a gem of the wealth management industry and a growing, thriving company if its advisors can finally get the respect, support and treatment they deserve,” it said read in the letter. “We are writing to you today to stress that our plan includes advisors whom you have suffered from for far too long because of Blucora’s missteps and bad decisions.”
The list of complaints in the letter notes that advisors are being pushed away from their traditional direct-to-fund model and towards Avantax’s separately managed accounts, fees are being charged on advisors, and their business is generally not understood.
Blucora was founded by a former Microsoft engineer who developed tax planning and preparation software for professional accountants. In 2015, the company switched to wealth management and acquired HD Vest, a broker / dealer for tax planning consultants, for $ 580 million. Bob Oros, CEO of HD Vest, later became CEO of Hightower Advisors.
The current General Manager of Blucora, Chris Walters, is a former Digital Media General Manager and was a Senior Partner at Activate, a consulting firm focused on technology, media and digital companies, and CEO of Encompass Digital Media, a technology services company. He has been on the board of directors at Blucora since 2014, assuming the position after John Clendening stepped down last year. Clendening, who has been CEO since 2016, left the company because of mixed views about his authority as CEO. In the period between his resignation and Walters’ announcement, the interim CEO office consisted of a number of senior executives, including Avantax President Enrique Vasquez, who was named one of them WealthManagement.com Ten to see in 2020.
In his letter, Ancora claimed that Blucora failed to “invest enough in Avantax” during the pandemic and spent millions on compensation for CEOs and directors. They criticized Blucora for charging consultants and maintaining “an uncompetitive pricing model” even after corporate costs doubled over a two-year period.
“We suspect that far too much of this capital has been used for executive compensation, board fees and corporate expenses rather than providing value-added support to individuals like you,” the letter to the advisors said.
According to Ancora, Avantax’s advisors have dropped from 4,472 in 2016 after acquiring HD Vest to 3,770 in 2020. Most recently, the San Diego-based $ 200 million AUM company Basic finance group has been with LPL since October.
A letter from the Blucora board On Monday, he called on shareholders to vote for the incumbent board members, claiming that DiSanto began “demanding” seats on the board shortly after Ancora began buying shares last November.
“The board tried hard to get in touch with Ancora … but on several occasions Ancora refused to allow the board to speak to its candidates at all,” read Blucora’s letter. “When we failed to comply with Ancora’s unreasonable request to see Ancora’s candidates replace our existing directors, Ancora decided to launch an expensive and distracting proxy competition.”
Blucora executives pointed out the company Takeover of HK Financial Services last year and said its wealth management business is on track to resume “long-term organic wealth growth.”
In addition, Blucora’s board of directors criticized Ancora nominees, including Cindy Schulze Flynn, director of marketing and communications for Union Home Mortgage, Robert D. MacKinlay, CFO of Gardiner Service Company, and Kimberly Smith Spacek, partner of Owl Creek Asset Management. Blucora said DiSanto was the only one of the four with experience in public companies and would likely be “conflicted and too busy” to serve.
“He is not only CEO of Ancora, a competitor to Blucora’s wealth management business, but also CEO of a public company and a board member of three public companies,” said Blucora’s letter. “Ancora’s efforts, as we can best judge, appear to be aimed at advancing a simplified alternative plan that seeks to potentially generate short-term value at the expense of destroying long-term value for all shareholders.”
The vote will be announced during the annual general meeting of Blucora, which is due to take place on April 21st.