A Cetera Financial Group firm plans to dissolve as a broker-dealer and add its 200 advisors to its parent firm’s largest BD in a move executives say was prompted by challenging times.
Girard Securities will bring its $7.7 billion in client assets to the country’s 10th largest IBD, Cetera Advisor Networks, by Nov. 1, the firms announced this week. FINRA must approve the wind down, which would make the San Diego-based firm a unit within the IBD and reduce Cetera’s total member firms to six.
Girard’s new IBD has grown its ranks by three practices this year, including the latest move, amid legal fallout for former parent RCS Capital and partial implementation of the fiduciary rule. The rule and other factors mark a “whole new era” for the space, says Girard CEO Susie Woltman Tietjen.
“It necessitates a different way of looking at our business that is different from the traditional IBD model,” says Tietjen, who will become director of the new Girard Region at the IBD. “Cetera has recognized that we’re at a key inflection point.”
She adds of the firm’s move, “It’s not driven by anything other than to improve and elevate the advisor experience.”
Cetera acquired Girard back in 2014, when RCS Capital and its chief, Nicholas Schorsch, still controlled the firm. Following an accounting scandal and subsequent bankruptcy, Cetera’s ownership changed hands into a privately-held entity called Aretec Group — “Cetera” spelled backward.
More than 2,500 advisors operate through Cetera Advisor Networks, out of nearly 9,000 at its member firms. Pershing will become the full custodian of Girard’s assets under the move, having previously acted as a dual custodian alongside Fidelity’s National Financial Services, Tietjen says.
Directly held assets, roughly split down the middle between brokerage and advisory accounts, comprise about 60% of Girard’s client assets, she notes. Pure brokerage assets make up the rest. Executives expect Girard’s termination as a BD to begin in early November, pending FINRA oversight.
Advisors with Girard will merge on to Cetera’s advisor and client systems, which include a new investment platform the firm says is fully compliant with the Department of Labor rule. Cetera also launched facial recognition software called Decipher, which is designed to analyze clients’ emotions.
“Those are some of the key deliverables that their advisors will get on Day One,” says Cetera Advisor Networks President Tom Taylor.
OPTIMISM AMID CONTRACTION
Revenues at the Top 50 IBDs in the country fell by more in 2016 than they did at the lowest period of the Great Recession, driven by lower commissions across the sector. Income at Cetera Advisor Networks dropped by more than 7% last year to $519.5 million from $559 million in 2015.
Girard, however, marks the El Segundo, California-based IBD’s second new region in the past three months created by absorbing another firm. HBW Partners, which has 55 advisors, also gave up its own BD in late June, opting to join Cetera Advisor Networks as an office of supervisory jurisdiction.
The Girard move represents yet another example of the sector’s consolidation in a period of change, according to Taylor. Previously independent firms can focus on the “fun stuff” of serving clients and growing practices, while their new parent firms handle their administrative burdens, Taylor says.
“We have a very robust pipeline and continue to have numerous conversations with small to midsize broker-dealers,” he says. “Our recruiting is as strong as it’s ever been.”