Kentwood’s Regal Financial LLC, an independent financial services firm that constituted the largest U.S. branch of reps and advisors for SagePoint Financial Inc., has pulled out of that AIG-owned business and is setting up its own broker-dealer organization.
In announcing a new partnership last week with American Portfolios of Holbrook, N.Y., Regal president John Kailunas II said Regal is starting its own broker-dealer organization called Regulus Advisors, and that the expansion of the company “will generate a hundred new jobs here in West Michigan.”
American Portfolios Financial Services Inc., a broker-dealer, functions primarily as a technology support service for independent financial professionals in private practice, according to its Web site. Kailunas said Regal and American Portfolios have formed a partnership “to create a dynamic opportunity for independent brokers.”
Kailunas said the creation of Regulus has been in the works for about a year and a half. It will go into operation “hopefully, within the next four months,” he said, noting the firm is now in the final organizational stages involving work with the Financial Industry Regulatory Authority and the SEC.
“Regal will be a producer group within Regulus,” he said.
Kailunas said Regal was started by him, Lawrence Taunt and Brian Yarch 10 years ago, and up to February had been an independent part of American International Group Financial Advisors Inc. he said AIGFA changed its name to SagePoint a year ago “because they were in the news every two minutes” related to problems with investments in derivatives.
The Regal brokers “were their largest producer group in the United States,” said Kailunas.
“When I recruited all these great brokers, I told them, ‘Hey, you’re backed by a trillion dollar company. What could go wrong?’” recalled Kailunas.
According to Investment News, Regal has about 100 advisors and generated $9 million in fees and commissions last year.
AIGFA suffered serious negative publicity after the credit crisis and federal bailout of its parent company, AIG. Investment News reported in February that almost a quarter of AIGFA brokers had quit between late 2008 through late 2009.
Citing the “turmoil” at SagePoint, Regal decided to go off on its own, said Kailunas. The affiliation with SagePoint ended Feb. 12.
“With different goals and values, Regal made the decision to move on and create a new future for their affiliates and themselves,” according to a statement released by Regal. It notes that Regal’s affiliates include 120 brokers in nine states, with an estimated $1.4 billion worth of assets under management.
Kailunas told the Business Journal that in January, Regal added North and South Carolina to the previous nine states in which it is active.
The company, which has 17 employees at its offices at 2687 44th St., will probably expand to about 120 employees over the next three or four years to service the anticipated growth in its force of independent brokers. He expects Regal to have about 1,000 brokers in about eight years from now.
Kailunas said Regal is looking to buy another building to house the additional employees required for its broker-dealer operations.
“We are now starting to look for talent,” he said, noting that the staff to support more brokers will need to be in place first.
Kailunas said most broker-dealers are based in New York City, and he believes “Midwest values” will be an asset in the expansion of the business.
“I call it ‘home cooking,’” said Kailunas, describing that as a place “where people can sit down at a table and get issues resolved.”
Some brokers now take the approach of “my way or the highway,” said Kailunas.
“We will have a more innovative approach — a common sense twist,” he said.
American Portfolios, a Pershing platform, will clear the trades electronically for Regulus, but Regulus will handle its own compliance, supervision, licensing, registration and other procedures, said Kailunas.“We didn’t want to be in the technology business. We wanted to be in the broker business,” he said.
“This is a stressful profession,” he added, so not having to invest in and manage the technology processes will help.
Regal is a stockbroker, doing individual trades, commodity trades, and all other traditional broker activities including selling term insurance.
The past two years in the financial services industry were terrible, said Kailunas, noting he has been in the business for 22 years. He said there are generally presumed to be about 10 different types of investment assets, including stocks, bonds and real estate. “There was not one (type of asset) that didn’t get slaughtered” during 2008 and 2009.
He said he has had competition from day traders and people buying and selling stocks on their own, but “now people are seeing value in having a professional. We’re seeing great growth in the marketplace.” At the same time, “the big (brokerage) companies are letting people go or being bought by banks. We see a great opportunity to get great talent,” he said.
Kailunas concedes, however, that people are still a little nervous. “I think we’re going to see a long and prosperous growth here, but there’s too many balls up in the air” right now, he said.
“The leadership in Washington and in Lansing has not given clear direction,” he said, citing health care as a national example, and within Michigan, the issues regarding revitalization of the state’s economy, and the state’s taxation policies.
“Until those are resolved, there will be a little uncertainty in the market,” he said, which is always trying to determine what the situation will be six months out.
Ultimately, he predicts we will see long, steady growth. “You’re not going to see any big growth spurts, any huge bubbles. You’re going to see more of a traditional market,” comparable to 30 years ago, he said.