Riley Financial Inc. (NASDAQ: RILY), a leading investment bank, has faced a tough year with its stock price dropping by more than 68%. The dramatic decline reflects major struggles, including financial challenges, advisors leaving, and increased regulatory scrutiny. Several experienced financial advisors have chosen to leave B. Riley for its competitors in recent months.
One of these advisors is Brian T. Cohen, who joined Ceros Financial Services on 18th last month, according to public records. Just days earlier on Nov. 14, Russ Zalatimo, HudsonPoint Capital’s head, joined Arete Wealth Management, which deals will alternative investments.
Other significant exits include Eric Lyon, who left in October for Kestra Investment Services. Lyon, previously B. Riley’s senior MD, brought a team managing $1.4bn in assets. In September, Philip Wunderlich, connected to Wunderlich Securities’ founder (acquired by B. Riley in 2017), switched to Prospera Financial Services. These departures show a clear trend of advisors leaving the firm for better opportunities, highlighting concerns about B. Riley’s ability to retain talent.
So what’s causing this? Well, analysts believe that the American Financial Service company is experiencing deep financial issues. To address some of its issues, B. Riley is selling parts of its business. Earlier this month, it announced the sale of its wealth management group for employees, which includes 40–50 W2 advisors who are full-time employees. Stifel Financial is reportedly acquiring it for $27–$35 million.
However, the sale price was much lower than expected. In September, reports suggested Stifel might buy B. Riley’s retail brokerage section for $100m. However, Stifel’s interest in the company’s independent advisors, who are contractors, remains unclear. Independent advisors often generate less revenue than W2 advisors, creating additional challenges for B. Riley as it looks to stabilize its finances.
The SEC is currently investigating whether B. Riley disclosed risks properly in some of its assets. There are also questions about the founder’s relationship with Brian Kahn, the former CEO of Franchise Group Inc. Kahn stepped down earlier this year after B. Riley took part in a leveraged buyout of the company.
Riley is clearly struggling on multiple fronts, and the road ahead is looking difficult. The loss of key advisors, a falling stock price and questions about its financial practices have hurt its reputation. While the firm is trying to raise cash through asset sales, it faces an uphill battle in retaining advisors and rebuilding trust with clients.
If B. Riley wants to recover, it will need to act fast. Strengthening its leadership, addressing regulatory issues, and offering better opportunities for advisors are critical steps. Otherwise, more advisors and clients may look elsewhere.
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