Nicholas Schorsch may have exited RCS Capital, but major issues remain for the 9,000-plus advisors at one of the nation's largest independent broker-dealers.

"The question for advisors is to what extent are their services going to be affected by the turmoil?" says executive recruiter Danny Sarch, president of Leitner Sarch Consultants. "I don't see how any top advisors have a great allegiance to either Schorsch or RCS right now."

Loyalty to RCS-owned companies, which include Cetera Financial Group, First Allied and J.P. Turner, may indeed be in short supply, says fellow headhunter Mindy Diamond.

'KEEPS GETTING WORSE'

The latest Schorsch bombshell, as well as the steady drumbeat of negative news over the last three months "makes quality advisors super uncomfortable," according to Diamond, president of Diamond Consultants. "The majority are independent, so are free agents, and this may well be an impetus to leave.

"Many came under the Schorsch umbrella by default via acquisitions of their firms," Diamond explains, "and were unhappy about being part of a big firm they didn't fully understand. Adding bad press to the equation makes already unhappy advisors unhappier."

That assertion is seconded by several West Coast-based advisors who left Cetera last year but still have close ties to the IBD.

Noting that Cetera has had five different owners over the past two decades, one advisor says, "Cetera advisors are sick of it. They want consistency and they are not getting it. Everybody is skeptical about everything and the story keeps getting worse."

NO MASS EXODUS

Nonetheless, a mass exodus of top advisors is unlikely, according to another former Cetera advisor, citing the firm's regional director system.

The regional directors tend to be higher-producing advisors who are responsible for overseeing other advisors in their region and receive a percentage of the revenue that those advisors generate, the former advisor explained. "In addition, the regional directors also serve as the Office of Supervisory Jurisdiction (OSJ).

What's more, Cetera advisors tend to all be housed in the same location, making it that much more difficult to move, the advisor adds. The advisors would need to totally relocate and move their client base.

"The revenue the regional directors receive is significant, and is very hard to give up," he says. "It's a unique structure that's very antiquated, but also very hard to unwind."

But one prominent wealth management executive who spoke on background believes a number of RCS advisors may still be looking for a way out.

"I suspect that guys looking for a reason now have one," the executive says. "They may feel their brand is too tarnished. I would bet the recruiters and competitors are pounding phones hard calling their advisors. It could result in management having to cut deals to keep people."

Schorsch himself is not without influence at RCS: he remains a significant shareholder, owning over 19 million shares of common stock.

SPIN-OFFS LIKELY?

Industry consultant Tim Welsh, president of Larkspur, Calif.-based Nexus Strategy, thinks the RCS turmoil may also spur its rivals to take action.

"Look for the stable big guys -- LPL, Raymond James, Cambridge, etc. -- begin to opportunistically pick off the big producers as RCS has to focus on its core business of REIT manufacturing to stabilize their internal operations," Welsch says.  "Advisors do not like uncertainty with their mothership and will start to look elsewhere to calm their clients."

Welsh also offered a prediction for 2015: "Eventually, RCS will sell back the IBDs or spin them out to stop the bleeding."

RCS and Cetera said their executives were not available for comment.

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