Insurance company wants to take its securities business up market. German-owned annuities provider Allianz Life has purchased Questar Capital Corporation, a securities brokerage based in Ann Arbor, Mich. Allianz Life says the acquisition will double its annual broker-dealer sales and pave the way to its USAllianz unit becoming a top-10 U.S. broker-dealer by the end of this decade, in part by enhancing its wealth-management capabilities.

Details of the transaction weren’t disclosed. Questar’s principals – Robert Boone, Scott Chimner, John Gakenheimer, Jason Kavanaugh – will either join USAllianz as senior managers or work as consultants to the newly expanded broker-dealer.

“This is an opportunity for us to grow our business,” says Lynn Tyson, president of Minneapolis-based Allianz Life's retail securities division. “We now have the tools to offer our clients total wealth management.”

Yes and no

The deal adds Questar’s nearly 400 independent brokers to USAllianz roll of 668 independent reps, and it includes Questar’s small registered investment advisor platform. Questar, which was founded in 1997, is registered to sell securities and security products in all 50 states.

Allianz Life’s hope of doubling its securities brokerage sales seems plausible given the fact that Questar reps, though fewer in number, work up market from their USAllianz counterparts.

Though annuities dominate both platforms, Questar’s fee-based business, at $350 million in assets at the end of 2004, is about 10 times bigger than USAllianz’ fee-based platform, according to data from SourceMedia. For that matter, Questar edges USAllianz out in commission sales as well, $29 million to $23 million in 2004. Average annual payout for a Questar broker was $75,585 last year; at USAllianz it was $29,961. At Questar 14% of brokers pulled in $150,000 or more; at USAllianz only 3% did.

USAllianz and Questar recorded impressive sales gains in 2004, with USAllianz increasing revenue by 48% and Questar adding 34% to its top line.

Both firms clear through Pershing. Both offer access to fee-based portfolios through AssetMark. USAllianz also uses the third-party investment platforms of Lockwood, which is a unit of Pershing, and Jackson National Life-owned Curian Capital. Questar brings third-party provider Advisorport, part of PFPC, to the table.

USAllianz has its work cut out to become a top-10 broker-dealer by the end of the decade. Even if the wirehouses and other large full-service players were to vanish, Allianz Life’s brokerage unit, including Questar, would have 47 broker-dealers to surpass in annual sales before it achieves top-10 status in the independent category. And that’s assuming the competition stays still through 2010.

Allianz Life is part of Frankfurt-based Allianz Group. –FWR

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