RCS Capital's acquisition spree doesn't seem to be panning out as Wall Street had hoped.

Nicholas Schorsch's expanded financial advisory business reported adjusted net third-quarter income of $35.5 million on Thursday, or 40 cents per fully diluted share -- disappointing Wall Street analysts, who expected earnings of 43 cents a share for the quarter, according to a Thomson Reuters poll. Pro forma revenue for the third quarter was $725 million, up 10%, from the same period last year.

Yet revenue was driven by higher retail and investment management results, RCS reported, while offset by "expected lower wholesale distribution, investment banking and capital markets revenue."

And despite the earnings miss -- and a current feud with fellow Schorsch operation American Realty Capital Properties, which has been rocked by an accounting scandal -- RCS Capital chief executive Michael Weil mounted a strong defense of the beleaguered financial services firm's future prospects.

"Our retail advice business remains unaffected by the recent events involving American Realty Capital Properties," Weil said in a statement, "and we expect to continue to retain and recruit industry-leading advisors while exhibiting both strong revenue and EBITDA growth in the fourth quarter of 2014 and in 2015."

OUTSIDE REVIEW

Weil also said that RCS, which is the country's second-largest independent broker-dealer by advisor count, had retained an outside law firm and a forensic accounting firm to review the company's records, not including emails -- and that he was satisfied with the results.

Following the review, the company "remain[s] confident in the company’s reported historical financials, accounting, and internal controls for each of the three quarters in the nine-month period ending September 30, 2013," Weil said.

RECRUITING & RETENTION

Despite the controversies of the past few weeks, RCS has "received positive feedback" from its retail advisor network, according to Weil. He cited a 97.8% retention rate and "strong recruiting results" for the third quarter.

One RCS-owned firm, Summit Brokerage Services of Boca Raton, Fla., just added two advisors with combined assets of over $100 million this week. Indeed, the IBD has had "the best recruiting we've ever had in the history of our firm" since being acquired by RCS in June, says Marshall Leeds, Summit's chairman and CEO.

Nonetheless, questions remain about the fallout resulting from the decision of a number of leading independent broker-dealer networks and custodial firms to suspend sales of products from Schorsch-owned companies.

Citigroup analyst William Katz predicted in a note to clients that RCS Capital would only raise $8 billion in 2015 and 2016, compared with $14 billion in 2013 and $13 billion in 2014, the Wall Street Journal reported. Katz cited "likely further slowdown in November given the number of [broker-dealer] platforms suspending related products," as well as broader macro factors.

Weil said RCS will "continue to work closely with our wholesale broker-dealer network to provide them with the factual information they need to clarify any outstanding questions or concerns."

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