No 'stay bonuses' for Cetera Financial Group reps

Firm confirms brokers will not be offered retention bonuses to stay on after acquisition by Genstar Capital

Jul 19, 2018 @ 5:20 pm

By Bruce Kelly

Cetera Financial Group has no plans to give extra pay to its 8,000 brokers and financial adviser in the form of "stay bonuses" after the company said on Tuesday it had sold a majority stake to Genstar Capital, a private equity firm.

Stay bonuses payments are customary to lock advisers in their seats after a change in ownership of a brokerage firm. Advisers typically work off the payments, usually in the form of a note or loan, over a three to five-year period.

When a brokerage firm is acquired, advisers at times are consumed with paperwork for clients and their accounts if they are changing platforms. Because no such disturbance will occur at Cetera, some in the industry believed that the brokers would not be in line for a bonus.

That thinking appears to be accurate.

"Given that there will be no disruption to our advisers and their business we do not anticipate the need for a traditional retention plan," said Joe Kuo, a spokesman for Cetera, in an email.

That decision may force some Cetera advisers to weigh a relatively new, unprecedented recruiting deal that Cetera competitor LPL Financial is currently dangling before select advisers, industry observers said.

Instead of paying a broker a percentage of the prior year's fees and commissions, known as an adviser's "trailing 12" in the industry, LPL is paying a signing bonus based on a percentage of assets moving over to its corporate advisory platform.

John Simmers, a longtime top executive with the network of broker-dealers formerly owned by ING Groep that were eventually transformed into the current Cetera Financial Group, said an adviser who generated $200,000 or $250,000 in annual fees in commissions might qualify for a signing bonus almost double his annual production under the LPL formula.

"The same rep, if he shops around, may get a $400,000 signing bonus," Mr. Simmers said.

Mr. Kuo said that Cetera would focus capital on other parts of advisers' businesses over a bonus. The firm intends to accelerate "investments in areas such as recruiting, business acquisition and lead generation as well as other key organic growth levers that tangibly increase the value of each adviser's business," Mr. Kuo said.

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