Early in her career, when she was 36 and considering joining Taco Bell, Valerie Brown's father offered her an easy parachute into the financial services industry. A regional vice president covering the Pacific Northwest for A.G. Edwards in Boise, Idaho, at the time, her father wanted to hand over his book of business to his daughter but she said no.
"I thought about it seriously," recalls Brown, 56, now CEO of one of the fastest-growing networks of independent advisors in the country, Cetera Financial Group in El Segundo, Calif. She didn't want to go back to Boise. However, given a host of new options for advisors these days, she thinks her father might never have made the offer. "I think, had dad gone independent, that he very well could still be enjoying his career today," Brown muses.
For her part, Brown has lead four separate lives prior to becoming the catalytic figure she is today in the advisory world: as an engineer working on offshore oil platforms at Chevron, a senior manager at Bain doing consulting, a vice president in marketing at Taco Bell and a financial services executive at ING.
Along the way, she gathered skills that seem uniquely suited to her current perch. Engineer-style problem solving, mass marketing and overseeing a herd of independent-minded entrepreneurs are part of the job description at Cetera. In person, at close to six-feet tall, she's got a disarmingly open personality.
"When somebody with presence walks into the room, you know it. And Valerie has presence," says Brown's good friend and vendor Jamie Ohl, president of portfolio management company Wilshire Funds Management in Santa Monica, Calif.
THE RISE OF ROLL-UPS
It's surely a useful trait for the CEO of a company that is looking to remake the status quo and woo acquisition targets with the prospect of protection from a well-capitalized new owner. Indeed, Brown - who recently worked on the acquisition of Genworth Financial Investment Services - sits atop one of the best-positioned acquirers of broker-dealers and independent advisory companies right now. As a group, roll-ups are riding a wave of consolidation set in motion by the financial crisis.
"Firms with a strong position in the market, like LPL, Raymond James and Cetera, will find plenty of opportunity in 2012 to round out their capabilities and to increase scale in their business," Alois Pirker, research director at Aite Group, wrote in a report in January. However, neither Pirker nor Brown thinks "roll-up" is the right word to describe Cetera.
Brown describes her firm as a family of broker-dealer RIAs that differ in character. "We don't believe one size fits all," she says. "We are focused on [advisors] to ensure that they are in perfect position to be financial quarterbacks to their clients."
To that end, Brown would like to see the status of advisors rise in acknowledgment of the transformational role they play in the lives of clients. "They remove fear. They give hope. They let people realize their dreams. We work with people who do that on a daily basis. It's my passion. I can't imagine doing anything else."
Her timing is right. Cetera is well-positioned to scale because it already has scale. "You swing a dead cat and you hit [another company] who's trying to do this," says Mark Hurley, co-founder of Dallas-based Fiduciary Network, which provides passive capital to wealth management firms to make acquisitions in the fee-only space. "But she has scale. It's what makes financial markets in the U.S. more efficient. It's a good thing."
Scale is a critical factor given the high cost of keeping pace with the rapid expansion of regulatory oversight and technological change. Those and other factors are squeezing the margins of smaller independent broker-dealers and advisory firms, making them more likely to seek the haven of a larger partner. Cetera offers its own proprietary technology platforms to advisors to make their work easier, as well as ongoing educational support, and other benefits.
In the past four months, Brown put Cetera on track to nearly double the number of its advisors to 7,000. The company is awaiting regulatory clearance on its deal for Genworth and its 2,000 advisors. In December, the company signed a recruitment deal with Pacific West Financial Group and its 300 advisors. Some outsiders predict Cetera will grow its advisor ranks to 10,000.
At some point, given that Cetera is majority-owned by private equity firm Lightyear Capital, there will be an equity event. Brown and her executive team are shareholders, as are some prominent advisors. For now, Brown says, "I would like Cetera to become an icon for independence." She says there are many faces of independence, which, at Cetera, encompasses advisors who are fee-only, commission-based or dually registered.
Brown believes there's a need in the marketplace for both fee- and commission-based sales models even as the industry migrates toward fee-only. At Cetera, clients with less than $50,000 to invest are less likely to have a fee-based account structure because, Brown said, the costs would be too high.
Over her work life, Brown honed her analytical skills in her first career as a chemical engineer for Chevron. While still an intern from Oregon State University, she clambered inside processing columns at an oil and gas facility to test for weak spots in the metal. After graduation, she stayed on, hard hats, steel-toed boots, "mechanics' hands" and all. "You know that kind of dirt?" Brown asks, rubbing her clean fingers together as if remembering the feel with a mixture of relish and revulsion, "no matter how much you wash, you can't get it out of your skin."
From Chevron, she went to Stanford Business School, then to Bain, where she worked as a consultant at the time when Mitt Romney was CEO. As a "26-year-old peon," Brown says, she watched the future contender for the 2012 Republican presidential nomination oversee a multitude of firms. "He was able to coalesce a lot of positive energy," she says.
From Bain, Brown went to PepsiCo subsidiary Taco Bell, gaining exposure to the world of mass marketing. Next, she spent 14 years climbing the ranks at ING, culminating in the CEO spot at ING Advisors Network.
In the wake of the financial crisis, the bank decided to get rid of three of its four advisory firms as it refocused on its core business. For Brown, it was the chance to head up her own company in her father's profession. In February 2010, ING sold those businesses to a group of investors lead by Lightyear. Brown helped put the deal together and run the newly created entity, named "Cetera." The Latin word means "other" - as in "et cetera" - to indicate the company's emphasis on serving others. "It means we work for our advisors and the clients," she says.
Finally, Brown would captain her own ship. "I always knew that I wanted to run a firm," she says. Her father, who's now 86, retired nearly 20 years ago. "The people we serve do what my father did," Brown says, and some of them are even still at it. "The advisors that are dad's age are doing just great for their clients." FP
Ann Marsh is a senior editor and the West Coast bureau chief of Financial Planning.