In his first interview after officially moving his firm to Cetera Financial Group last week, Ron Carson acknowledged there was friction between him and his old broker-dealer, LPL Financial, and said he ultimately lost faith in the ability of LPL to provide the technology and services he felt he needed in order to move his firm into the future.
“The things critical to our future success were not available at LPL,” said Mr. Carson, 52, regarded as one of LPL's highest-profile and longest-tenured financial advisers.
By moving his firm, Carson Wealth Management, from LPL to Cetera, Mr. Carson ends a 28-year relationship with the nation's largest independent broker-dealer, and starts a new one with a smaller firm that has a checkered past and which emerged from bankruptcy less than a year ago.
The move could be damaging to LPL if other major players affiliated with the broker-dealer follow Mr. Carson and his $8 billion firm out the door. On the other hand, snaring Mr. Carson is a major coup for Cetera's new CEO, Robert Moore, who at one time was the president of LPL and who Mr. Carson expected to become the firm's CEO.
A boost for Cetera
Mr. Moore, who left LPL in 2015 when the board passed on appointing him CEO, said he “absolutely” plans to leverage Mr. Carson as a tool to recruit other advisers to the firm.
“For us, this is a strong vote of confidence about the future of Cetera,” Mr. Moore said. “It highlights a lot about the future of our industry, and the factors that matter beyond just being a service provider.”
As for bringing Carson Wealth on board, Mr. Moore said, “It wasn't your normal recruiting process; it was much more of a partnership dialogue.”
“Ron knows I'm committed to being supportive of his business whether he chose to come to Cetera or not,” Mr. Moore added.
The sentiment is mutual.
“When (Mr. Moore) was at LPL, he shared our vision for the future and how the industry was changing; he understood the need for heavy investment into technology so that things were integrated for ways that benefit advisers and consumers,” Mr. Carson said. “When Robert was president at LPL we thought he would be the next leader.”
LPL executives declined to be interviewed for this story, but through spokesman Jeff Mochal, it issued this statement: “LPL Financial and Carson Wealth Management have been great business partners for 28 years, and both companies remain focused on meeting the specific needs of our clients. After amicable conversations, we mutually agreed to part ways.”
Although Mr. Carson said there had been friction with LPL, he said he is leaving the firm in a professional manner.
“When we realized we would not be working together going forward, we quickly agreed that we did not want this to end badly," he said. “They know how hard we worked to try and make this work.”
Mr. Carson said he does not expect LPL to contact any of his clients to try and prevent them from leaving with him.
Mr. Carson said Cetera has been able to satisfy his company's needs going forward.
“We are gaining pure integration with the technologies we have, and clean data delivered at a certain time so everything will work more seamlessly,” he said. “We are eliminating inefficiencies to the greatest extent possible, including unnecessary costs, and Cetera is aligned with the fact that most of our new business is going to be advisory business.”
As he severs ties with LPL, Mr. Carson is forging a new relationship with a firm with a troubled past. Cetera was a broker-dealer built by Nicholas Schorsch, better-known for building an empire in the nontraded real estate investment trust industry.
Mr. Schorsch's debt-fueled buying binge of retail brokerages in 2013 and 2014 pushed RCS Capital, Cetera's parent company, into bankruptcy. Cetera, which has nearly 9,000 advisers across a network of seven brokerage firms, emerged from bankruptcy last year with new owners and no ties to Mr. Schorsch.
(More: How Nick Schorsch lost his mojo)
“I don't wear that history on my sleeve every day,” Mr. Moore said. “It is the past and we have focused on going forward. So many people here have gone through so much adversity, which was by no fault of their own. It was just thrust upon them.”
Just seven months removed from a restructuring away from the Schorsch era, Mr. Moore said he is cognizant that “anyone who is affiliated with us, or is considering it, is going to ask about our independence and corporate governance.”
“We have done a lot of work in a relatively short period of time to get us to the point where we can have those conversations,” he added. “At this point, we're basically a $2 billion startup; an enterprise of an entity that went through a difficult time.”
Mr. Carson is slightly more guarded on the matter of Cetera's connection to Mr. Schorsch.
“I've never been a Nick Schorsch fan,” he said. “Many of the core people are still at Cetera, and the visionary we were following at LPL is now there.”
Regarding the possibility of current or potential clients doing their own research on Carson Wealth's new brokerage partner, Mr. Carson admitted there is always a chance of people reading enough to learn only part of the story.
In an effort to head off any potential misunderstandings among clients, Carson Wealth has created a frequently-asked-question document for its 8,000 individual clients, 98% of whom are not on the brokerage side of the business.
“The fact that Nick Schorsch was once involved ... is irrelevant.”— Ron Carson, Founder and CEO, Carson Wealth Management
“The fact that Nick Schorsch was once involved, at this point, is irrelevant,” he said. “With the people they have at Cetera, and with the advisers that they have, this is going to be a winner. Our clients know us and they know we don't do anything lightly. We feel very confident Cetera is going to be a very good partner.”
Based in Omaha, Neb., Carson Wealth Management is an $8 billion asset conglogmerate that includes a practice management coaching program, Peak Advisor Alliance, and Carson Institutional Alliance (CIA), a turnkey asset management platform affiliated with 48 offices and 85 advisers.
The departure from LPL, where Carson Wealth had $1.6 billion in brokerage account assets and another $1 billion on the advisory side, coincides with a strategy to deepen relationships with Fidelity Investments, TD Ameritrade, back office service provider Orion Advisor Services and eMoney Advisor, a fintech firm backed by Fidelity.
Fidelity and TD Ameritrade will become Carson Wealth's lone custodians, while the brokerage assets will be moved to Cetera.
Carson Wealth has been custodying assets with TD for four years, but only started a custodian relationship with Fidelity over the past 18 months.
“I've been on the eMoney advisory board from its inception, and when Fidelity bought eMoney I inherited the relationship with Fidelity,” Mr. Carson said. “In that process I really got to know the Fidelity team. We're making a major bet that Fidelity is going to continue along the lines of investing in eMoney.”
Rick Folk, the Fidelity regional managing director working closely with Carson Wealth, said the discussions “came down to us being focused on being a catalyst for transformation in the wealth management space.”
“The conversations were really easy because [Mr. Carson's] vision is aligned with our vision of being future ready,” Mr. Folk added. “He really has a vision for wanting to evolve, and the sky's the limit.”
Despite multiple references to technology and innovation, that isn't usually the kind of thing that drives major relocations, according to Tim Welsh, president and founder of Nexus Strategy.
“A lot of broker-dealers are trying to upgrade their systems after years of falling behind, but business still gets done, and the technology still seems to be good enough for the thousands of other advisers,” he said. “Ron Carson is his own institution, so he's able to negotiate pretty much whatever he wants.”
On that point, Mr. Moore insists Cetera did not over-extend itself in negotiations with Carson Wealth, but Mr. Moore did not elaborate.
While Mr. Carson said he will continue to operate in a broker-adviser hybrid capacity at Cetera, similar to the hybrid role he maintained at LPL, he described the brokerage side as a necessary convenience for some clients. But it's not where he sees the financial advice industry heading.
“It's easier for us to be RIA-only, and not worry about brokerage, but that's not always what our clients want,” he said. “There are times when a brokerage account is in a client's best interest.”