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?”
