Under pressure, will Cetera advisers jump ship?

Under pressure, will Cetera advisers jump ship?
Some are feeling skittish about their future prospects as parent company RCS Capital Corp. operates under an $800 million debt burden.
JAN 07, 2016
Some financial advisers affiliated with Cetera Financial Group's broker-dealers are beginning to feel skittish about their future prospects as parent company RCS Capital Corp. operates under the twin weights of a decimated stock price and an $800 million debt burden. Outside recruiters are calling Cetera reps “all the time,” said one adviser, who asked not to be named. “There's no doubt that the calls are more in depth than informal. Smart advisers are evaluating their options,” he said, particularly after private equity giant Apollo Global Management in November pulled back from a deal in which it would have acquired other assets controlled RCS Capital, Cetera's parent company. RCS Capital, or RCAP, is furiously attempting to remake itself. It recently sold off its non-adviser assets, announced the closure of its wholesaling operations, Realty Capital Securities, and is working with investment bank Lazard Freres & Co. to raise capital and rationalize the company's capital structure. It has laid off 200 employees so far. Its stock on Friday afternoon was trading at 31 cents per share, down from $12 per share just 12 months ago. RCAP has a new CEO, industry veteran Larry Roth, and its former leader, Schorsch associate Mike Weil, quietly resigned from the board earlier this month. RETENTION RATE Against that chaotic backdrop, advisers with the Cetera broker-dealers have remained remarkably loyal, industry executives and recruiters have recently said. Indeed, the annualized retention rate for Cetera's 9,500 registered reps and financial advisers is 96.4%, comparable to industry leaders such as LPL Financial and Ameriprise Financial. Executives and recruiters also noted that certain advisers, particularly those affiliated with Cetera Advisor Networks, formerly Financial Network Investment Corp., are tied to the company by sweet deals that include above average payouts. What's more, it's a slog for any adviser to move to a new firm. So inertia is also clearly a factor. (More: How Nick Schorsch lost his mojo) NO SATISFACTION That may be changing. A large group of 28 advisers with $500 million in assets left Investors Capital Corp., a Cetera firm, with their transition starting at the end of October and running through this month, said Tom Halloran, president of Voya Financial Advisors Inc., the firm those advisers joined. “There are several questions that continue to come up in conversations as to why a rep leaves a firm,” said Mr. Halloran. “First, are reps dissatisfied with the technology at any given firm? Second, is the compliance any good? Next, how are operations and service, good, bad or indifferent? And last, the stability of the home office. With the market's continued volatility, it means a lot if the home office is stable.” “This is the largest team we have recruited. It just happens to be from Investors Capital,” said Mr. Halloran. “There's not been a lot of movement in RCAP reps, but will that change?”

Latest News

JPMorgan tells fintech firms to start paying for customer data
JPMorgan tells fintech firms to start paying for customer data

The move to charge data aggregators fees totaling hundreds of millions of dollars threatens to upend business models across the industry.

FINRA snapshot shows concentration in largest firms, coastal states
FINRA snapshot shows concentration in largest firms, coastal states

The latest snapshot report reveals large firms overwhelmingly account for branches and registrants as trend of net exits from FINRA continues.

Why advisors to divorcing couples shouldn't bet on who'll stay
Why advisors to divorcing couples shouldn't bet on who'll stay

Siding with the primary contact in a marriage might make sense at first, but having both parties' interests at heart could open a better way forward.

SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives
SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives

With more than $13 billion in assets, American Portfolios Advisors closed last October.

William Blair taps former Raymond James executive to lead investment management business
William Blair taps former Raymond James executive to lead investment management business

Robert D. Kendall brings decades of experience, including roles at DWS Americas and a former investment unit within Morgan Stanley, as he steps into a global leadership position.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.