Cetera Financial Group is continuing its aggressive expansion, announcing Friday it had agreed to acquire two independent broker-dealers from
MetLife Inc for an undisclosed sum.
Cetera is laying the groundwork for a “smooth as silk” transition of the advisers, said Valerie Brown, CEO of Cetera Financial Group, in an interview Friday. The company will begin a road show with the Walnut Street and Tower Square advisers next week.
Ms. Brown didn't mention specific details of a retention package for the advisers, but said, “Like any deal, we'll help (advisers) with transition” costs. “We think this is an easy transition (for the advisers) and then can benefit from the tools we have.”
With more than 800 financial advisers and registered reps, those two independent broker-dealers, Tower Square Securities Inc. and Walnut Street Securities Inc., have recently been on the block. Many large insurance companies are getting out of the independent-broker-dealer business because of the high risk and tight margins prevalent in the industry today.
Spreads on sales of variable annuities, once a huge money maker, have tightened in the wake of record-low interest rates. This has caused insurers to re-evaluate whether they want to remain in the risky business of product distribution.
InvestmentNews first reported Cetera's imminent acquisition of the two
MetLife broker-dealers on March 1.
MetLife is not completely exiting the independent-broker-dealer industry. It continues to own two other independent broker-dealers,
MetLife Securities Inc. and New England Securities Inc., but advisers at those firms operate much more as captive insurance agents, meaning they work more closely with the insurance company and less as independent financial advisers.
Tower Square and Walnut Street, which both have been steadily losing reps and advisers in recent years, will be folded into the largest Cetera broker-dealer, Cetera Advisor Networks LLC, which now has more than 2,000 financial professionals. The firm last year generated $360.5 million in total revenue.
Cetera Advisor Network operates via large branches or “super OSJs,” short for office of supervisory jurisdiction, in the nomenclature of independent broker-dealers. That is a similar structure to Tower Square and Walnut Street. Most of those branches are located in the Midwest and Northeast.
Craig Markham, president of Tower Square and Walnut Street, will join Cetera Advisor Networks as a senior vice president, according to the statement He will oversee the transition of the two firms.
After the deal's close, the timing of which was not included in the statement, Cetera Financial Group will have more than 7,000 reps and advisers under its umbrella and $130 billion in client assets.
Cetera recently has been one of the most active buyers of independent broker-dealers — in 2012, it acquired Genworth Financial Investment Services and later rechristened it Cetera Financial Specialists LLC.
Ms. Brown said the independent contractor broker-dealer industry is likely to continue to see mergers and acquisitions.
“It's not my perspective that the industry is through with
consolidation,” she said.
Cetera's network of independent broker-dealers was born in 2010 when private-equity firm Lightyear Capital LLC, run by former PaineWebber Group Inc. chairman and chief executive Donald Marron, bought three broker-dealers from Dutch insurer ING Groep NV. It acquired one other broker-dealer last year.
