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Legg Mason Closes 82% Stake Purchase in Financial Guard

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Legg Mason Inc. completed the acquisition of 82% stake in Financial Guard LLC, an online Registered Investment Advisor based in Salt Lake City, UT.  Financial terms of the transaction remained undisclosed.

Operating since 2011, Financial Guard, with the help of its advanced technology platform, provides investment advice through its interactive website. The company offers portfolio analysis and recommendations for both passive and active funds.

Financial Guard will be part of Legg Mason's alternative distribution strategies business. The company intends to complement the Financial Guard platform’s capabilities with investment products from its nine independent investment managers.

A Strategic Acquisition

The latest move by the Baltimore-based asset manager is in line with its long-term strategy focused on providing investors with choices “across investment capability, product and vehicle, and distribution.”

During the announcement of the acquisition deal last month, Legg Mason stated that the acquisition will not only boost the technological capabilities to aid business growth of the advisors but also meet the requirements of the Department of Labor's fiduciary rule effective Apr 2017. The new rule, which requires all financial advisors to put their clients’ best interest ahead of their own profits, is applicable to retirement accounts such as 401(k) plans and Individual Retirement Accounts.

Legg Mason noted that it will offer the Financial Guard platform to firms that are seeking technology solutions to meet additional compliance requirements in a cost-efficient manner.

Bottom Line

Buoyed by a sound liquidity position, Legg Mason has been able to undertake strategic acquisitions in the past couple of years. Further, this year in January, it acquired a minority equity position in Precidian Investments, an innovator of products particularly for the ETF market.  While in April, the company acquired majority interest in a leading diversified real estate investment firm – Clarion Partners, in May it combined the EnTrust and Permal businesses, with Legg Mason holding 65% ownership in EnTrustPermal. The company should benefit in the long run owing to its strategic investments.  

However, several issues including regulatory headwinds, global uncertainties and revenue pressure remain near-term concerns.

Legg Mason currently carries a Zacks Rank #5 (Strong Sell). Some top-ranked stocks in the finance space include Enterprise Financial Services Corp. (EFSC - Free Report) , Credit Acceptance Corp. (CACC - Free Report) and  Hancock Holding Company , each sporting a Zacks Rank #1 (Strong Buy).

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