Cetera Financial Group's 8,000 brokers are taking a wait-and-see attitude in reaction to news that their company has been sold yet again, this time to a private equity firm that could very well put it up for sale down the road.
One big question to be answered is whether the firm will offer its brokers bonsues to stay at the firm. Known as "stay bonuses," such payments are customary to lock advisers in their seats after a change in ownership of a brokerage firm.
"The advisers don't know what to expect because this private equity group doesn't have a track record" owning brokerage firms, said Jodie Papike, president of Cross-Search, a recruiting firm. "Advisers don't know how involved the new parent company will get. But there is a wait-and-see attitude from advisers about this."
After
months of speculation, Cetera
earlier this week said that private equity firm Genstar Capital had bought a majority stake in the company, which is home to six broker-dealers. Terms of the deal, slated to close in the third quarter, were not disclosed. Cetera's leadership team is maintaining what it refered to as a "meaningful ownership position," according to a press release announcing the sale.
Although Genstar hasn't owned a broker-dealer before, it isn't new to the financial advice business. It has previously invested in companies such as Mercer Advisors, an independent registered investment adviser, and AssetMark, which offers an investment, client relationship and practice management platform for independent financial advisers.
A spokesman for Cetera, Joe Kuo, did not respond to a call to comment earlier Thursday afternoon.
Cetera has changed hands
several times since the credit crisis and the prospect of being involved in another transaction was disheartening to one Cetera adviser, who asked to speak anonymously.
"When you're purchased by a private equity firm, that means this isn't the last sale," said the adviser. "That will create more noise for advisers and has more of an impact on home office staff. The question mark is still there for people who earn a salary at the home office. We are still one step away from finding a home."
In 2010, Lightyear Capital, led by Don Marron, bought the majority of ING Advisors Network from Dutch insurer ING Groep and then renamed it. Then, in 2014, nontraded REIT czar Nicholas Schorsch said that the brokerage company he controls, RCS Capital Corp., bought Cetera Financial Group for $1.15 billion in cash from Lightyear.
Burdened by $1.1 billion in debt used to fuel Mr. Schorsch's broker-dealer buying binge, RCAP said in early 2016 it entered a pre-arranged bankruptcy, from which it emerged with new management and a new board in May. RCAP's debt holders were the new owners of the company.
The six firms that make up Cetera's independent broker-dealer network are: Cetera Advisor Networks, Cetera Advisors, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities and Summit Financial Services Group. Together, the six broker-dealers controlled $241.2 billion in client assets at the end of 2017, according to InvestmentNews data.
