Incentives for eligible advisers are from 2% to 11% of their total annual revenue.
Cetera Financial Group is giving retention bonuses to some of its advisers, but they are at the low end of what other firms are generally offering.
The bonuses for eligible Cetera advisers can range from 2% to 11% of an adviser's annual total revenue, according to company sources and at least one industry recruiter.
Terms of the bonuses have been quietly discussed this month with some of Cetera's 9,000 financial advisers and branch managers at the 10 different broker-dealers that comprise the network, sources said. Cetera management has not reached out yet to all advisers, leaving some in the dark.There is no set formula, and management is taking into consideration an adviser's character and how engaged he is, such as whether he participates in the broker-dealer's committees, and whether he has a clean compliance history.
When a broker-dealer is being sold or, in the case of Cetera's parent, RCS Capital Corp., working its way through bankruptcy, advisers are typically offered a “stay,” or retention bonus, as an incentive to keep them productive and from defecting to a competitor. Bonuses for advisers at independent broker-dealers typically come in the form of a three- to five-year forgivable note.
RCS Capital said at the end of January it was entering bankruptcy with the goal of cleaning up its balance sheet and eliminating hundreds of millions of dollars of debt. After the company emerges from bankruptcy, Cetera will focus solely on retail financial advice. At the time it filed for bankruptcy, RCS Capital said in a court filing it had set aside at least $50 million for retention bonuses.
Advisers who produce less than $250,000 in annual total revenue, known as gross dealer concession, or GDC, are not in line to receive a bonus, said a branch manager at Cetera Advisors, one of the broker-dealers in the network. Those who produce $500,000 to $1 million in annual total revenues are in line to receive a bonus of 7.5% to 8%, while advisers who post near $2 million in annual sales are slated to receive the largest bonuses of 11% of annual GDC, the manager noted.
The range of bonuses for Cetera brokers who stay in their seats is far less than the 20% to 40% of annual GDC that some competing firms are currently offering, the manager said. But some Cetera advisers are staying in place and considering taking the bonuses because changing broker-dealers is such a daunting task, said the manager, who asked not to be identified.
“Two percent to 11% is not a lot of money, obviously,” the manager said, adding that the bonuses will be split into two payments. Advisers will receive two-thirds this spring and then the final third in 12 months.
One industry recruiter, Jodie Papike, said she had spoken with a Cetera adviser who generates $750,000 in total revenues, and he was offered a bonus of 6%, or $45,000, in the form of a five-year note.
Cetera advisers should be prepared to be disappointed, she said. “It was way less than what he expected,” said Ms. Papike, executive vice president of Cross-Search.
When asked about the specifics of the compensation package, Cetera officials declined to comment.
“We have worked closely with the leadership of our network's member firms to develop a methodology for participation in our adviser retention program, encompassing a range of qualitative and quantitative factors,” Joseph Kuo, a Cetera spokesman, wrote in an email. “Our firms have commenced the process of communicating further details to eligible advisers on an individual basis, and given the size of our adviser base, this will take some time."
“Our advisers recognize both the realities of current market conditions as well as impending regulatory challenges, and are overwhelmingly focused on serving and retaining their clients right now, versus taking up their clients' time and their own with exploring broker-dealer transitions that consume bandwidth but don't necessarily add value to their client relationships at this time,” added Cetera CEO Larry Roth in the email.
Meanwhile, Cetera advisers have plenty of questions regardless of the amount they may get in a stay bonus, Ms. Papike noted. “What will their firm look like in one to three years?” she asked. “Will they all be consolidated together or will they remain separate? If an adviser is offered a five-year note, is he comfortable with the direction of Cetera?”
