SAN DIEGO — Many in the industry learned for the first time this year of the demise of credit union-owned broker-dealer XCU Capital Corp., which had served nearly 30 clients for 20 years.
The investment advisory firm was quietly bought in the summer of 2007 by LPL Financial Corp., an independent broker-dealer giant with more than 800 clients, including 200 credit unions and $235 billion in assets under management. All but one of its 24 credit unions clients decided to move over to LPL after the acquisition. It was discovered this year that XCU Capital's fall had many layers from not having enough resources to compete with bigger competitors, lack of scale to the possible impact of regulatory violations.
Founded in 1987 by then Xerox Federal Credit Union, now the $757 million Xceed Financial CU, XCU Capital had changed its structure a few times over the past two decades. It started out with 10 credit union clients and, in 2002, Xceed Financial, which owned 99% of the broker-dealer, sold its stake to Mountain America CU, Premier America CU, SAFE CU, Schools Financial CU, State Employees' CU, The Golden One CU, Travis CU, TRW CU (later merged with Western FCU) and WesCorp. All entered into a purchase agreement for 60% of XCU Capital and its subsidiary, Focus Insurance Agency, together investing $2.3 million in the firm. The transaction doubled the number of XCU clients through credit unions to more than 50,000 and assets under administration to $1.5 billion.
Mark Hoaglin, XCU Capital's former CEO, was hired by LPL Financial Institution Services as senior vice president of credit unions, a new role created to oversee the division charged with building more alliances within the movement. In November, Hoaglin, left LPL to launch his Native Son Ventures, a consulting firm.
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