While Cetera Holdings is trying to make the 3,100 financial advisors at Avantax Inc. comfortable as Cetera works to close its acquisition of the tax-focused firm by the end of the year, it looks as if very few will get a New Year's gift in the form of "transition assistance," or a stay bonus, and for those who do, it will be slim pickings.
InvestmentNews reported last week that bonuses were likely to be a topic at a webinar Cetera senior management held last Thursday with the Avantax advisors, after Cetera said two weeks earlier that it was buying the tax-focused broker-dealer stocked with certified public accountants for $1.2 billion in cash.
"Transition assistance was discussed, but there were no details," one well-placed source said about the meeting.
Now, some figures are getting clearer. "Cetera is not going to offer any transition money until near to the close of the deal in December, and only if they have to, and the plan is to pay no more than 5% to 10% of an advisor's GDC," another source said.
GDC stands for "gross dealer concession," or the annual fees and commissions a financial advisor generates. Stay bonuses, which Cetera has paid in the past, and recruiting deals for financial advisors are often paid in terms of a percentage of an advisor's annual fees and commissions.
A spokesperson declined to comment.
Cetera is working toward a smooth transition for the Avantax financial advisors, according to industry sources, with as little change as possible and no repapering of clients' accounts, which would require clients to fill out new paperwork. That includes keeping the clearing firm used by Avantax Investment Services Inc., the broker-dealer, which currently clears trades with Fidelity’s National Financial Services. Cetera uses Pershing.
Cetera Financial Group, a giant network of broker-dealers with 9,000 financial advisors and $341 billion in client assets, was purchased by Genstar Capital, a private equity investor, in 2018.
On Wednesday, Cetera said that Genstar had made a reinvestment in the firm, but didn't announce exactly how much.
"Genstar's new investment is led by its newest fund, Fund XI, with additional capital from Fund X, and positions Cetera for continued growth and success," the companies said in a news release. "Genstar will remain Cetera's majority investor and lead partner."
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