Cetera Financial Group continues to build its broker-dealer network, this time planning to acquire an independent broker-dealer that focuses on tax and accounting.
Cetera said Monday that it is acquiring
Genworth Financial Investment Services Inc., which has nearly 2,000 independent reps and advisers, most of whom are tax and accounting professionals.
Genworth Financial Investment Services, which will have a new name in the coming months, is the independent-broker-dealer subsidiary of insurer Genworth Financial Inc. According to a statement on Genworth Financial’s web site, Cetera Financial paid $78.5 million, plus an earnout provision, for the broker-dealer. The earnout is based on the broker-dealer hitting certain revenue goals over a one-year period. Genworth Financial said it expected to record a $15 million after-tax gain related to the sale of the broker-dealer.
The acquisition, which is slated to close in 90 days pending regulatory approval, increases by more than half the head count of registered reps and investment advisers affiliated with the three broker-dealers currently under the Cetera umbrella. The other broker-dealers are Financial Network Investment Corp., which has 1,800 reps and advisers, PrimeVest Financial Services Inc., with 1,400, and Multi-Financial Securities Corp.,1,000.
Cetera has been busily adding reps of late. Last month, it said it had an exclusive recruiting agreement for the advisers at Pacific West Securities Inc., which is scheduled to shut down by March 1. That firm had 290 reps and advisers.
Genworth Financial Services, which produced $105.9 million in gross revenue in 2010 and ranks as the
16th-largest independent broker-dealer in the business, will remain a stand-alone broker-dealer, said Valerie Brown, CEO of Cetera.
“Tax and accounting professionals are well-positioned in the retirement crisis,” Ms. Brown said. “More than ever, tax professionals are in a good position for quarterbacking” clients' investment needs, she said.
“In this industry and with the current economic environment, to stay leading-edge to your clients, you need a wealth management partner to stay in front with technology,” she said. Staying on top requires “scale and focus,” Ms. Brown said.
Tax and accounting professionals are not typically large-producing brokers but are coveted in the industry for their relationships with clients. Indeed, private-equity fund Parthenon Capital Partners said in June it was buying H.D. Vest Financial Services Inc., the largest broker-dealer that focuses on tax professionals and accountants.
In 2011, 244 of Genworth Financial Investment Services' reps and advisers produced between $100,000 and $499,000 in fees and commissions, while just 13 produced more than $500,000, according to the most recent InvestmentNews survey of broker-dealers.
(Click here to see Genworth's full firm profile in the InvestmentNews B-D Data Center>)
Enrique Vasquez, CEO of the Genworth B-D, said the acquisition gives the firm and its advisers needed scale.
“Our business needs scale to continue to invest in the platform, and Cetera provides that,” he said. “Look at their advisory platform and technology — they are industry-leading and complement the turnkey solutions we have today.”
Genworth Financial, meanwhile, recently has been cutting back on noncore business. A year ago, company management said the insurer was ending sales of retail and group variable annuities. The carrier also suspended sales of its linked-benefit product, which was a combination of an annuity product with long-term-care features.
