A $2.5B branch moves to Cetera for RIAs, flexibility and growth

Cetera Financial Group scored a major win over rival Advisor Group's Securities America by picking up a hybrid RIA looking for flexibility and growth, a haul that underscores a fierce fight for the largest branches of independent wealth managers.

The Patriot Financial Group, a Westborough, Massachusetts-based group of 70 financial advisors with $2.5 billion in client assets, chose Cetera Financial Specialists as its brokerage, the firms said on Jan. 10. Patriot had moved to Securities America only four years earlier, when it had about $1 billion in assets and 30 fewer advisors. In addition to rounding out Cetera's influx of more than $14 billion in client assets gained through advisor recruiting last year, the branch is the latest example of massive teams in motion among independent wealth management firms. 

Independent branches differ from the more familiar bank outposts or a national company's local office primarily in the way that they provide operations, technology and investment services to groups of advisory practices through a separate firm that's distinct between the financial advisors and the brokerage. Firms like Patriot or fellow Cetera branch Farpointe Wealth Partners and LPL Financial counterparts such as Private Advisor Group and Financial Resources Group Investment Services represent some of the giant brokerages' most important relationships. Patriot, which also has a large network of accounting firm referrals and its own registered investment advisory firm, sought more flexibility for its particular structure.

CEO Michael Tashjian and Chairman David O'Donnell "did a lot of interviews with a lot of other broker-dealers," Tashjian said in an interview.

"A lot of independent broker-dealers really don't know how to work with RIAs," he said, noting that the industry's evolution to RIAs and advisory services in recent years. "Cetera seems to be at the cutting edge, at the forefront, of those changes to work with an independent RIA like us. They're willing to support us, but not … overreach into the independent RIA space."

Tashjian and O'Donnell moved to Securities America in 2018 from LPL after a change in that firm's policies on so-called hybrid RIAs, like their branch. Advisor Group "just didn't fit our model," said O'Donnell, adding that the firm has paid back the remaining balance of a seven-year bonus loan it disclosed as part of the earlier move.

Representatives for Advisor Group declined to comment on their exit. Barron's Advisor first reported the move.

Industry News

The biggest transitions by independent brokerages this year

December 19, 2022 4:45 PM

Including Patriot and an M&A deal that became public earlier this week, 31 independent wealth management firms with at least $1 billion in client assets went to new brokerages or shifted their ownership in 2022. That's up from 28 in 2021 and just 13 in 2020. Wealth management firms grew massively during the decade-long bull market for stocks that finally dried up last year amid inflation and interest rate hikes, and many firms expanded on the strength of additional recruiting and the record-breaking volume of deals in each of the past 10 years. Organic growth from new clients and tacking on more business among existing ones played a role, too.

Rockville, Maryland-based XML Financial Group, an RIA owned by Focus Financial Partners that has its own brokerage, had about $500 million in client assets when it joined Focus in 2016. After three M&A deals, organic gains, recruiting and market appreciation that receded last year, the firm of 27 advisors manages nearly $4 billion in client assets, according to CEO Brett Bernstein. In an interview, he cited a "handful of reasons" that teams with $1 billion or more decide to make a move: succession planning, a desire to offload tasks such as compliance and tech and a wish to "grow faster and more efficiently."

"Advisors should take phone calls," Bernstein said. "Sometimes people say, 'I'm not interested, now's not the right time. I find, a lot of times, maybe they're just not educated on it. …  Educating yourself only makes you a better advisor and ultimately helps you find the right solution for your firm."

Despite the substantial moves of the past year and a record flow of recruited client assets coming to Cetera in 2022, the company had its "worst two months" in October and November, when "the entire industry froze" because of the volatile slumps in stocks and bonds during those months, according to Head of Business Development John Pierce. 

"The financial professionals who are good were talking on the phone to their clients," Pierce said. "We would expect to see a surge in Q1 that is probably going to be unprecedented, based on what we typically see."

Industry News

6 ways that independent wealth managers are consolidating the industry

December 15, 2022 3:58 PM

Patriot made the formal switch to Cetera on Dec. 15, according to FINRA BrokerCheck. With its large number of referrals from accountants and enrolled agents, the branch selected Cetera's tax-focused brokerage, Cetera Financial Specialists. The team led by Tashjian and O'Donnell is keeping its RIA but using Cetera's corporate RIA for a portion of its advisory assets as well. For nearly the past 20 years, the branch has been using a team structure that pairs the main advisor in each of its offices with specialists in fields such as insurance and 401(k) services. The branch retained 98% of its registered representatives through the transition, Tashjian said.

"We take care of the reps, and give them everything they need to do their job," O'Donnell said. "If we take care of the reps, they will take care of the clients, and they won't leave us. They can trust the leadership, and they can have access to anything they want in the industry."

The branch generates about $16 million in annual revenue, according to Pierce, who pledged that his team of recruiters will help Patriot add to that total.

"It's a huge business, and our job is, how can we help Dave and Mike grow to 50 [million]," Pierce said. "We've probably put more candidates in front of Dave in the last month than he saw in the last five years."