Cantor Fitzgerald makes big splash in wealth management with First Commonwealth deal

Renowned trading firm strikes a deal to acquire a bank-owned RIA with more than $2 billion in assets. And it's not finished. Here's what Cantor is looking for.

Cantor Fitzgerald, the storied trading firm, is starting to make inroads in the wealth management business.
In a move that signals its growth ambitions, the firm said Thursday that its new wealth management unit has agreed to buy the business of a bank-owned registered investment advisory firm that advises on more than $2 billion in assets.

Cantor Fitzgerald Wealth Partners, launched last year, is acquiring the core business of Pittsburgh-based First Commonwealth Financial Advisors Inc.

“We have a significant presence on a global basis, and in the institutional space we have tremendous infrastructure. Certainly from a standpoint of adding a business we felt that the wealth management arm would be something that would be a logical one because we trade every security in the world,” said Cantor Fitzgerald & Co. chief executive Shawn P. Matthews.

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Mr. Matthews is no stranger to the wealth management business.

His wife, Monica, is an adviser at Merrill Lynch Wealth Management. And Mr. Matthews spent some of his college days in the 1980s cold-calling prospective clients as an intern at PaineWebber, the brokerage firm subsumed by Swiss wealth manager UBS AG.

Cantor is looking to brand itself as a feasible alternative to the wirehouses and other boutique wealth management firms, industry analysts said.

“The evolution of the big institutions, from a cultural, regulatory and a compensation standpoint, are significant,” Mr. Matthews said. “People who used to like the cultures of their firms are questioning them as they change to more of a big bank concept.”

Cantor Fitzgerald Wealth Partners has added four adviser teams since September and is looking to add more, according to Stan Gregor, the president and chief executive.

“We are in a very aggressive acquisition mode,” said Mr. Gregor, a former Wells Fargo & Co. wealth management executive.

“We are blessed with the strong balance sheet of Cantor Fitzgerald,” he said. “We do not need to raise any capital from private equity funds.”

Mr. Gregor’s comments could strike a chord with some financial advisers who resist linking with firms whose private-equity owners might dilute their ownership or influence business decisions.

The firm offers advisers an equity stake and profit-sharing as well as access to the trading giant’s platform, whose third-party partners include Envestnet Asset Management Inc., Fortigent, Wilshire Associates Inc. and custodians Fidelity Institutional Wealth Services and Schwab Advisor Services.

“The truth is that Cantor Fitzgerald has a great brand, and so this is a natural expansion of their brand,” said consultant April Rudin. “It’s not Coke or Pepsi or Doritos building out a wealth management unit.”
Terms of the deal weren’t announced.

The Pittsburgh offices will continue to be led by adviser Richard R. Applegate, according to Cantor.
In a statement, the president of 110-branch First Commonwealth Bank, Jane Grebenc, said that the decision to “realign” its investment advisory services with Cantor “reinforces our mission as a community bank and enables First Commonwealth to focus our resources on our core community banking business, trust, insurance, brokerage and investment management efforts.”

Many banks have struggled to integrate wealth management units, according to consultants who study the business.

New York-based Cantor Fitzgerald, founded in 1945, built a major bond-trading business before acquiring unwanted notoriety when 658 of its employees died at the World Trade Center during the terrorist attacks on Sept. 11, 2001. In recent years, the firm has rebounded, acquiring and building back much of the business lost then.

Third-party recruiter Mindy Diamond is also working with the firm.

“What I think is really intriguing about it is it’s responding to what advisers want now,” she said of the firm. “They want something that’s independent, but they don’t necessarily want to build it from scratch.”
Cantor’s advisers are employees, but they can participate in equity ownership of the firm and share in profits, Ms. Diamond said.

Advisers who work with the firm get the advantage of a brand-name firm that may eventually go public, she said.

Cantor executives declined to comment on that prospect.

The firm is targeting advisers with clean records who produce more than $1 million in annual revenue on assets of $150 million or more, Ms. Diamond said.