Roth splits Advisor Group to join Schorsch's B-D

Big name hire marks latest step in American Realty Capital's expansion beyond nontraded REITs

Sep 5, 2013 @ 12:02 pm

By Bruce Kelly

A top executive in the independent-broker-dealer industry, Larry Roth, chief executive of Advisor Group, is leaving the brokerage network to join the broker-dealer controlled by the biggest name in the nontraded real estate investment trust business, Nicholas Schorsch.

Realty Capital Securities LLC, the broker-dealer and wholesaler for Mr. Schorsch's nontraded REITs, said Mr. Roth joined the firm today as its CEO. Realty Capital is the prime business unit of RCS Capital Corp., which had its initial public offering in June.

Mr. Schorsch is CEO and chairman of American Realty Capital, the overarching company for the variety of nontraded REITs and other investments sold through Realty Capital Securities.

Mr. Roth, 56, will assume the CEO role at Realty Capital Securities from Michael Weil, who will continue as chairman of the broker-dealer, and president and chief operating officer of American Realty Capital. Mr. Roth leaves Advisor Group as the fourth-largest broker-dealer network in the industry, with 5,400 reps and advisers who generated more than $1.1 billion in revenue last year.

In an interview today, Mr. Schorsch said hiring Mr. Roth is another step in the evolution of American Realty Capital as it seeks to expand significantly beyond the nontraded-REIT industry. This summer, Mr. Schorsch said American Realty Capital was ending its creation and distribution of new REITs that focus on net-lease real estate, a sector that has performed extremely well since the lows of the credit crisis.

Mr. Roth will be in the forefront of the firm's expansion of its products, including mutual funds, onto the platforms of wirehouses, Mr. Schorsch said. The large, national firms traditionally have shunned nontraded REITs and sold them only in a very limited capacity.

The potential for American Realty Capital's new relationships with wirehouses is “a huge area for Larry,” Mr. Schorsch said. “Our open-ended fund is sold as a wirehouse product. We're not just a nontraded-REIT company anymore. We are going to have more funds and are adding $500,000 to $1 million in assets per day to our mutual fund. That's going to be a very big product, and we expect to launch a second open-ended mutual fund, as well as move into liquid alternatives.”

AR Capital Real Estate Income Fund (ARIAX) is available on a number of platforms, including The Charles Schwab Corp., Pershing LLC and Wells Fargo & Co.'s First Clearing.

“Larry adds enormously” to Realty Capital Securities' effort with wirehouses, Mr. Schorsch said.

Mr. Roth has a deep background in the independent-broker-dealer business and is one of the most accomplished executives in the field, with a career that spans owning a firm to investment banking and running a network of broker-dealers for one of the largest insurance companies in the world.

American Realty Capital is a “young very entrepreneurial firm,” Mr. Roth said. “It's been designed by the partners to grow into a business resembling KKR & Co. LP. These are the early years of a hugely successful business.”

“I'm a hands on entrepreneurial manager, and that's the kind of culture you have at American Realty Capital,” he said. “The phone will be ringing 24/7 and that's great. It's a ground floor opportunity for me, personally.”

In 1990, Mr. Roth bought a firm, Vestax Securities Corp., and later sold it to ING Groep NV before becoming CEO of ING's U.S. Retail Group. In 2001, he joined investment bank Berkshire Capital Corp. to work on broker-dealer mergers and acquisitions. He then took over in 2006 as CEO of Royal Alliance Associates Inc., one of the broker-dealers in Advisor Group, which is owned by insurance giant American International Group Inc. He later became CEO of the entire network, which includes three other broker-dealers: FSC Securities Corp., Sagepoint Financial Inc. and Woodbury Financial Services Inc.

Mr. Roth also navigated Advisor Group through a particularly trying time when its parent company, AIG, drew public scorn and criticism for receiving tens of billions of dollars in bailout money from the federal government after AIG's collapse in September 2008. Soon after that the network dropped the AIG moniker from its name, and one of its firms, AIG Financial Advisors Inc., changed its name to Sagepoint Financial in an effort to gain distance from the AIG brand.

Mr. Roth said he was leaving Advisor Group during one of its top-performing years.

“Advisor Group is in excellent shape, with a great management team in place,” Mr. Roth said. “My leaving has nothing to do with AIG but everything to do with the opportunity at Realty Capital.”

Longtime AIG executive Peter Harbeck will serve as the interim CEO and president of Advisor Group, the company said in a statement. Mr. Harbeck is currently chairman of the Advisor Group and he will continue in his role as president and CEO of SunAmerica Asset Management Corp. at AIG.

Mr. Schorsch has recently turned the nontraded-REIT business on its ear, posting strong returns and returning capital in short periods of time to investors through mergers and stock listings known in the industry as liquidity events. One of the chief criticisms of the nontraded-REIT industry has been the length of time REIT sponsors have taken to return capital to investors.

American Realty Capital, which has close to a dozen offerings on its platform, has dominated nontraded-REIT sales the past couple of years.

Nontraded-REIT sales reached $7.8 billion in the first half of this year, an increase of 68.2% from last year, according to investment bank Robert A. Stanger & Co. Inc. American Realty Capital was responsible for 39.2% of all nontraded-REIT sales in the first half of 2013, according to Stanger.

Independent broker-dealers are the biggest distributors of nontraded REITs, and this is not the first time Mr. Schorsch has plumbed the industry. In June, Mr. Schorsch and a group of investors said they had agreed to buy a leading independent broker-dealer, First Allied Securities Inc., through a holding company, RCAP Holdings LLC. That deal is expected to close in the next few weeks. Mr. Roth said his job at Realty Capital Securities is independent of First Allied Securities.


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