John Simmers, a onetime leading executive in the independent-contractor brokerage industry, is jumping back into the business using a duel strategy that is closely linked.
First, he is leading a group of industry executives to acquire Calton & Associates Inc., a small broker-dealer with 200 independent and employee representatives. A longtime top executive with the network of broker-dealers formerly owned by ING Groep NV and now called Cetera Financial Group, Mr. Simmers and his group plan to change the name of Calton to Innovation Equity Partners Financial.
Central to the Calton acquisition is a new technology platform that Mr. Simmers thinks will give improved access to top-shelf programs that many small or midsize firms can't afford.
That platform, called Innovative Business Intelligence Technology Solution, is being used at Calton but will also be available to outside, nonrelated broker-dealers, he said.
Small and midsize broker-dealers have been deeply hurt by the credit crisis, recession and sluggish economy. The number of broker-dealers registered with the Financial Industry Regulatory Authority Inc. has fallen 12% over the past five years, with 4,384 broker-dealers now up and running.
The overwhelming majority of those are small or midsize firms — those with 100 or fewer reps, and between 101 and 500, respectively.
“Our platform for a hybrid adviser is going to be as good as anybody's out there,” Mr. Simmers said in an interview Wednesday afternoon.
In April 2009, he stepped down as chairman and chief executive of ING Advisors Network. Months later, ING sold the network to private-equity manager Lightyear Capital LLC, which rechristened the network Cetera.
Since then, Mr. Simmers has worked as a consultant, most recently focusing on the new tech platform with Calton, he said.
Mr. Simmers said that he and the group of executives expect to acquire about 50% of Calton by the end of the month, and eventually to control 80%.
“We are talking to a number of broker-dealers about the platform,” he said.
Mr. Simmers described the new platform as a data warehouse for broker-dealers and registered investment advisors at lower cost that will improve efficiencies, reduce risk and provide competiveness.
“These are services that small and mid-sized broker-dealers can't afford,” he said.
And working with Calton has given proof to these claims, Mr. Simmers said.
“We have taken these concepts to a small broker-dealer that by all accounts should be losing money, and has an 8% profit margin and is growing. This proves that you can have growth at a small broker-dealer,” Mr. Simmers said.
The independent broker-dealer industry is notorious for thin margins, with many healthy firms reporting low- to mid-single-digit margins.
Mr. Simmers' new management team at the broker-dealer and tech venture will include: Dwayne Calton, founder and CEO of Calton & Associates; Randy Ciccati, former president and CEO of PrimeVest Financial Services; Keith Gregg, former president and CEO of First Allied Securities; and Ramu Singh, former chief operating officer of Rady Asset Management LLC.