Genstar Capital buys majority stake in Cetera Financial Group

The private-equity firm has previously invested in such companies as Mercer Advisors and AssetMark

Jul 17, 2018 @ 5:51 pm

By Greg Iacurci

Cetera Financial Group, a network of six independent broker-dealers with about 8,000 brokers and advisers, said Tuesday evening that private-equity firm Genstar Capital will buy a majority equity stake in the company.

Cetera's holding company, Aretec Group Inc., has entered into a definitive agreement with Genstar. Terms of the deal, slated to close in the third quarter, were not disclosed.

Cetera's leadership team is "maintaining a meaningful ownership position," according to a press release, which didn't specify that position.

The deal marks the completion of Cetera's review of its capital structure, which the company publicly acknowledged in February. LPL Financial and Lightyear Capital, the owner of Advisor Group, had also expressed interest in a potential deal that was speculated to value Cetera at about $1.5 billion.

Genstar isn't new to the financial advice business. It has previously invested in companies such as Mercer Advisors, an independent registered investment adviser, and AssetMark, which offers an investment, client relationship and practice management platform for independent financial advisers.

In a note to advisers following its announcement, Robert Moore, the CEO of Cetera, said Genstar is a growth-oriented investor looking to invest in Cetera's "technology, advisor office enablement, and organic growth levers such as recruiting, succession planning and client acquisition."

Jon Henschen, a recruiter and consultant for independent broker-dealers, said it's difficult to gauge how successful the transaction will be, from the standpoint of the Cetera brokers, since Genstar hasn't previously invested in an IBD.

"This is going to be a new experience for them, and there's no track record to go by in terms of broker-dealers after they're purchased," Mr. Henschen said. "We've seen good and bad with private equity."

"The next two years will be quite telling, if they'll be a [broker] supporter or a cost-cutter," he added.

Going forward, Cetera will maintain a "multi-affiliation structure" that will "collectively serve the full spectrum of independent advisor businesses and financial institutions," according to the news announcement.

The board of directors who will guide Cetera's direction include Mr. Moore; Genstar managing director Tony Salewski and vice president Sid Ramakrishnan; Ben Brigeman, former executive vice president at Charles Schwab & Co.; and Hal Strong, former vice chairman of Russell Investments.

The six firms that make up Cetera's independent broker-dealer network are: Cetera Advisor Networks, Cetera Advisors, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities and Summit Financial Services Group.

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